
Class Mfr^.fO 

Book. ./4/r£V - 



Copyright^?. 



COPYRIGHT DEPOSIT. 



THE LAW 



RELATING TO 



Automobile Insurance 



BY 



JOHN SIMPSON 

II 



Selling Agents 

The Eastern Underwriter Co. 

86 Fulton Street 

NEW YORK 
1921 






Copyright 1921 
by John Simpson 



§)CI.A622830 



SEP 17 1921 




PREFACE 

K 

The purpose of the author in writing this book 
has been to present the law and fact of the au- 
tomobile insurance cases decided and reported 
to date in such a manner as to make them readily 
accessible to those interested in the subject, 
whether lawyers or laymen. The essential facts 
of the cases have been stated in detail, and the 
reasons of the courts for their decisions have 
been freely quoted from their opinions. 

New York, July, 1921. J. S. 



TABLE OF CONTENTS 



PART I 

Automobile Insurance Generally 

CHAPTER I 
Constitution of the Contract 

§ 1. Introductory 3 

§ 2. Insurable Interest & 

§ 3. Oral Contracts 4 

§ 4. Duration of Oral Agreements to Insure 4 

§ 5. Necessity for Acceptance or Approval of Application 5 

§ 6. Assured 's Knowledge of Loss Before Risk Attaches 6 

§ 7. Proposal and Counter Offer — Proof of Coverage 6 

§ 8. Agreements to Keep Car Insured 7 

§ 9. Prior Negotiations 7 

§ 10. Insured's Failure to Read Policy Immaterial 7 

§ 11. Renewals — New Car 8 

CHAPTER II 
Construction of Policy 

§ 12. Where Policy Unambiguous 9 

§ 13. Question of Ambiguity Remains for Court of Appeals 10 

§ 14. Construction of Ambiguous Clauses 11 

§ 15. Practical Construction by Parties 11 

§ 16. One Form Not to be Used to Aid Construction of Another 12 

§ 17. Effect of Rider 13 

§ 18. Deductible Clause 13 

CHAPTER III 
Reformation and Cancellation 

§ 19. Reformation of Policy for Mutual Mistake 14 

§ 20. Same 15 

§21. Cancellation of Policy — Necessity for Surrender 17 

§ 21a. Notice of Cancellation 18 

§ 22. Waiver of Condition as to Return of Premium 18 

§ 23. Waiver of Cancellation Provisions 19 

CHAPTER IV 

Notice and Proofs of Loss 

§ 24. Necessity for Notice and Proofs of Loss 21 

§ 25. Time for Notice and Proofs of Loss 21 

§ 26. Evidence of Receipt of Proofs by Company 22 

§ 27. Waiver of Notice and Proofs of Loss 23 

§ 28. Question of Waiver for Jury 24 

CHAPTER V 
Agents, Brokers and Adjusters 

§ 29. Authority of Local Agent 25 

§ 30. Limits of Agent 's Authority 26 

§ 31. Agent for Disclosed Principal 27 

§ 32. Agent for Undisclosed Principal 28 

§ 33. Broker 's Authority to Act for Company 29 

§ 34. Adjuster Cannot Delegate Powers 29 

V. 



§ 35. Broker or Agent as Insured's Agent 31 

§ 36. Adjuster's Authority to Admit Liability 33 

CHAPTEE VI 

Arbitration, Appraisal and Award 

§ 37. Waiver of Appraisal by Denial of Liability 35 

§ 38. Effect of Award 35 

§ 39. Appraisement Not Barred by Total Loss . . 35 

§ 40. Effect of Bad Faith of Appraisers 36 

§ 41. Failure of One Appraiser to Sign Award 36 

§ 42. Effect of Eefusal to Arbitrate 36 

§ 42a. Proceedings in Appraisement 37 

§ 42b. Sufficiency of Award 37 

CHAPTEE VII 
Extent of Loss and Option to Eepair 

§ 43. Expert Testimony as to Extent of Loss 39 

§ 44. Cost of Eepairs 39 

§ 45. Effect of Offer to Eepair 41 

§ 46. Time Within Which Offer is Available to Company 43 

§ 47. Company ? s Liability for Delay in Eepairs 44 

§ 48. Evidence as to Eepairability 44 

CHAPTEE VIII 
Eepresentations and Warranties 

§ 49. In General 46 

§ 50. Eepresentation made Warranty 47 

§ 51. Materiality of Eepresentations 47 

§ 52. Misrepresentations — Intent to Deceive 48 

§ 53. Misrepresentations as to Cost of Automobile 50 

§ 54. Misrepresentations as to Price May be Question for Jury 51 

§ 55. Knowledge by Company's Agent of Cost 52 

§ 56. Misrepresentations as to Year Model 53 

§ 57. Same — Good Faith of Insured Immaterial 56 

§ 58. Same — Inspection by Company 's Agent 56 

§ 59. Same — May be Question for Jury 57 

§ 60 Identification of Automobile 60 

§ 61. Eenting and Hiring Warranties 60 

§ 62. Same — Warranties Apply Both to Moitgagor and Mortgagee.... 62 

§ 63. Same — Occasional Use for Hire Held No Breach 63 

§ 64. Same — Effect of Statute Abolishing Warranties 64 

§ 65. Same — Violation for Jury — Burden of Proof 65 

§ 66. Location of Automobile — i ' Private Garage ' ? 65 

§ 67. Waiver of Location Warranty 67 

§ 68. Misrepresentations as to Other Insurance 67 

§ 69. Other Insurance Does Not Necessarily Forfeit Policy 68 

§ 70. Misrepresentations as to Ownership 69 

§ 71. Change of Ownership 71 

§ 72. Waiver of Condition as to Ownership 72 

§ 72a. Incumbrances 73 

CHAPTEE IX 
. Subrogation 

§ 73. Subrogation of Company to Owner 's Eights on Payment of Claim. 74 

§ 74. Same 75 

§ 75. Same . 78 

§ 76. Assignment of Claims Under Policies 79 

VI. 



CHAPTER X 

Actions and Defenses 

§ 77. Voluntary Settlements and Aids in Defense 81 

§ 78. Miscellaneous . 83 

PART II 
Matters Peculiar to the Different Kinds of Automobile Insurance 

CHAPTER XI 

Fire Insurance 

§ 79. Introductory 87 

§ 80. Fire Originating Within the Car 87 

§ 81. Reporting Fire -Losses — Dealer's Policy 88 

§ 82. Care of Automobile by Insured After Damage 91 

§ 83. Valued Policies 91 

§ 84. Same — Depreciation in Value 91 

§ 85. Valued Policy Laws 92 

§ 86. Deterioration in Value; Evidence 95 

§ 86a. Appreciation in Value 96 

CHAPTER XII 

Theft Insurance 

§ 87. Intent to Steal Necessary 97 

§ 88. "Joy Riding" 98 

§ 89. Intent Shown 99 

§ 90. Taking By Trick or Device Not Covered 99 

§ 91. Mere Trespass Not Theft 101 

§ 92. Conditional Sales 101 

§ 93. Special Contrart As to Conversion — Dealer's Policy 102 

§ 94. Conversion by Bailee Not Covered 103 

§ 95. Theft by Person in Insured's Employment. .- 104 

§ 96. Theft by Person in Insured's Household 106 

§ 97. Time for Reporting Loss by Theft 107 

§ 98. Theft of Equipment 107 

§ 99. Proof of Theft 107 

§100. Cars Recovered After Theft 109 

§101. Time Within Which Recovered* Car Must be Taken Back Ill 

§102. Extent of Loss by Theft 114 

§103. Unauthorized Change in Contract 115 

CHAPTER XIII 
Collision Insurance 

§104. In General 117 

§105. Distinction Between Collision and Accident Policy 117 

§106. Collision " With Any Object" 118 

§107. Upsets Excluded 120 

§108. Collision With Roadbed Excluded 123 

§109. Fall of Automobile Into Elevator Shaft Covered 125 

§110. Fall of Floor on Automobile Not Covered 126 

§111. Fall of Steam Shovel on Autotruck Covered 126 

§112. Violation of Law by Insured 127 

CHAPTER XIV 

Transportation Insurance 

§113. < < Stranding or Sinking" 129 

§114. ' < Derailment " 131 

VII. 



CHAPTER XV 

Indemnity Insurance 

§115. In General 134 

§116. Right to Issue Indemnity Insurance 134 

§117. Criminal Prosecutions Not Insured Against 135 

§118. Use of Car by Another Than Owner or His Servant 136 

§119. Use of Car by Member of Owner's Family 137 

§120. Indemnity Policies Insuring Partnerships 137 

§121. Indemnity Policies Insuring Partners 139 

§122. Exception of Cars Used for Demonstration .. 140 

§123. Violation of Statute and Provision of Policy as to Age of Driver. 141 

§124. Violation of Speed Ordinance 144 

§125. Violation of Statute As to Registration 145 

§126. Actual Payment of Loss by Insured; Liability or Indemnity 145 

§127. What Constitutes Payment of Judgment 147 

§128. Condition as to Payment Prohibited by Statute 148 

§129. Voluntary Payment by Insured Not Actual Payment 148 

§130. Right of Person Injured to Sue Insurance Company 149 

§131. " Bodily Injury' ' as Affecting Third Person's Right to Recover. 151 

§132. Judgment Against Insured; Garnishment 152 

§133. Aid by Insured in Defense of Negligence Action 154 

§134. Settlements by Insured Without Insurer's Consent 154 

§135. Effect of Insurer's Refusal to Accede to Compromise 155 

§136. Interference with Negotiations 156 

§137. Interference in Suits 157 

§138. Waiver by Insurer of Defense by Assuming Control of Suit 158 

§139. Effect of Insurer's Failure to Appeal 159 

§140. Insurer Cannot be Enjoined from Defending Suit Against Assured 160 

§141. Necessity for Notice to Insurer of Accident 160 

§142. Time for Notice of Accident 161 

§143. Waiver of Condition as to Notice of Accident 165 

§144. Amount of Recovery 166 

§145. Same ; Bond Premium Not Covered 167 

§146. Same; Insured's Costs After Insurer's Failure to Defend Suit... 168 

§147. Provision Against Waiver of Conditions by Company's Officers... 168 

§148. Effect of Settlement by Insurer on Rights of Insured 169 

§149. Effect of References to Insurance in Negligence Actions 169 

§150. Same; Error Cannot be Cured by Instructions to Jury 172 

§151. Same; Defendant Cannot Complain if Reference First Made by 

Him 174 

CHAPTER XVI 
Public Service Vehicle Bonds 
§152. Requirement by Statute or Ordinance of Bonds by Operators of 

Public Service Vehicles Valid 175 

§153. Immaterial that Bonds May be Beyond Reach of Some Owners... 176 
§154. Requirement of Surety or Insurance Company Bond or Policy 

Valid 176 

§155. Routing * 178 

§156. Liability for Lessee or Delegate Operating Bus 179 

§157. Extent of Surety 's Liability 180 

TABLE OF CASES 183 

INDEX 193 



VIII. 



PART I 
AUTOMOBILE INSURANCE GENERALLY 



CHAPTER I. 

Constitution of the Contract 

§ 1. Introductory. 

§ 2. Insurable Interest. 

§ 3. Oral Contracts. 

§ 4. Duration of Oral Agreements to Insure. 

§ 5. Necessity for Acceptance or Approval of Application. 

§ 6. Assurers Knowledge of Loss Before Risk Attaches. 

§ 7. Proposal and Counter Offer — Proof of Coverage. 

§ 8. Agreements to Keep Car Insured. 

§ 9. Prior Negotiations. 

§ 11. Renewals — New Car. 

§ 10. Insured's Failure to Read Policy Immaterial. 

§ 1. Introductory. — Part I deals with the general principles 
of insurance law as these have been applied in automobile in- 
surance cases. Part II deals with matters peculiar to the 
various kinds of automobile insurance, fire, theft, collision, 
transportation and indemnity. 

§ 2. Insurable Interest. — A policy to one who has no inter- 
est in the automobile purporting to be insured is void, and 
an assignment to the owner of an automobile of a policy 
issued by mistake to a previous owner of the car transfers 
nothing. O'Neill v. Queen Insurance Co. of America (1918) 
230 Mass. 269, 119 N. E. 678; Mowles v. Boston Insurance 
Co. (1917) 226 Mass. 426, 115 N. E. 666. If an insurance 
company issues an automobile fire and theft policy to a per- 
son who does not own the car and has no insurable interest 
in it and afterwards, through an agent, agrees orally to sub- 
stitute in the policy the name of the owner of the car in 
place of the name of the person to whom it was issued, this 
gives the owner, in case of loss by theft and subsequent fire, 
no right to bring an action on the policy, because the policy 
originally was void and its transfer could give no right; and 
the oral agreement to substitute the name of the owner was 



4 AUTOMOBILE INSURANCE LAW 

without consideration and did not create a new and inde- 
pendent contract of insurance. O'Neill v. Queen Insurance 
Co. of America (1918) 230 Mass. 269, 119 N. E. 678. 

§ 3. Oral Contracts. — Oral contracts of automobile insur- 
ance are legal and binding; Sheridan v. Massachusetts Fire 
& Marine Ins. Co. (1918) 233 Mass. 479, 124 N. E. 249; Cass 
v. Lord, (1920)— Mass.— 128 N. E. 716; Mowles v. Boston In- 
surance Co., (1917) 226 Mass. 426, 115 N. E. 666. But to be 
valid and enforceable the contract must be mutually binding 
and supported by a consideration. Cass v. Lord (1920) — Mass. 
— 128 N. E. 716; O'Neill v. Queen Insurance Co. of America 
(1918) 230 Mass. 269, 119 N. E. 678. An agreement by the 
insurance company's agents to change the name of the in- 
sured, assuming they had- authority to make the change, was 
held to be at most only a voluntary undertaking on the part 
of the insurance company and did not create a new and 
independent contract of insurance; the agreement, properly 
construed, plainly contemplated the delivery either of a new 
policy or the issuance of a rider in connection with the 
original. O'Neill v. Queen Insurance Co. of America (1918) 
230 Mass. 269, 119 N. E. 678. It is the duty of the owner 
of the automobile, within a reasonable time, to take some 
steps to ascertain whether the oral contract has ripened into 
a formal contract of insurance. O'Neill v. Queen Insurance 
Co. of America (1918) 230 Mass. 269, 119 N. E. 678. In 
Mowles v. Boston Insurance Co. it was said that "The oral 
contract to 'cover' means insurance for a reasonable time 
under all the circumstances * * * it is manifest that a con- 
tract to cover cannot extend beyond the time when a policy 
of insurance is delivered in apparent compliance with the 
contract." Mowles v. Boston Insurance Co., (1917) 226 
Mass. 426, 115 N. E. 666. 

§ 4. Duration of Oral Agreement to Insure. — A fire policy 
was issued by mistake in the name of a previous owner of 
the automobile. The owner called the agent's attention to 
this ; the agent told the owner "not to worry, that it was 



CONSTITUTION OF THE CONTRACT 5 

covered," took the policy, got an assignment of it to the 
owner and the assent of the insurance company thereto and 
some weeks later returned it to the owner, who accepted it. 
A month later the automobile was destroyed by fire. The 
owner sued the insurance company, alleging that the com- 
pany made an oral contract with the plaintiff to issue a valid 
policy of insurance against fire on the automobile, and that it 
had failed to issue such a policy. It was not contended that 
there could be recovery on the policy, because, since the as- 
signor of it had no interest in the automobile on the date 
of the policy or at any time thereafter, the policy was void 
and the assignment transferred nothing to the plaintiff. It 
was held that the owner could not recover upon an oral 
agreement to insure, because such oral agreement expired 
when the owner accepted the policy, and also because an 
agreement to "cover" the owner remains in force only for 
a reasonable time after the acceptance of the policy, and 
such reasonable time had expired before the fire. Mowles 
v. Boston Insurance Co. (1917) 226 Mass. 426, 115 N. E. 666. 

§ 5. Necessity for Acceptance or Approval of Application. 

— An application for automobile insurance is not itself a con- 
tract, but is merely a proposal, which requires acceptance by 
the insurance company through someone actually or ap- 
parently authorized to accept it, to give it effect as a con- 
tract. Where an application for insurance provides that the 
policy shall take effect on the day the application is ap- 
proved, if it is not approved, there is no contract of insur- 
ance. When, however, such application is approved by the 
company, the insurance thus applied for and paid for becomes 
effective, constituting a contract which neither party can 
change without the consent of the other. The insertion by 
the company of a restrictive clause in the copy of the appli- 
cation embodied in the policy thereafter issued, without the 
knowledge and consent of the insured, is held to be a wrong- 
ful act, and the insured is justified in repudiating it and in- 



6 AUTOMOBILE INSURANCE LAW 

sisting upon payment of the insurance in accordance with the 
agreement. Johnson v. Home Mutual Insurance Co. (1921)— 
Iowa— 181 N. W. 244. 

§ 6. Insured's Knowledge of Loss Before Risk Attaches. 

— Where the loss of an automobile, occurring before the 
risk attaches, is known only to the applicant, a policy subse- 
quently obtained by him without disclosing the fact of loss 
is void, even though the policy be given a date prior to the 
loss. Palmer v. Bull Dog Auto Ins: Assn. (1920) 294 111. 287, 
128 N. E. 499. 

§ 7. Proposal and Counter Offer — Proof of Coverage.— In 

order to constitute the contract the minds of the parties 
must meet on the same proposition. And where an insurer's 
counter offer to a proposal for insurance embodied in 
a policy and covering notes sent to brokers, was not 
accepted by the owner, the owner's payment of a pre- 
mium would confer no rights, except the right to re- 
cover the payment as for money had and received. Where 
insurance brokers, who had never done business with the in- 
surance company before, sent it a copy of a letter the brok- 
ers had written to an automobile owner, stating that his car 
was covered pending receipt of covering notes from the in- 
surance company, the company was justified in treating the 
copy sent them as a proposal to take insurance ; and since, 
in view of the requirements of the Oregon standard policy 
law (Laws 1911, p. 279), it could not be presumed that the 
insurance company violated the law and assented to the copy 
of a letter as an insurance contract, a policy and covering 
note which it sent in reply amounted simply to a counter 
proposition, which would not give rise to a contract, unless 
accepted. Cranston v. California Insurance Co. (1919) 94 
Or. 369, 185 Pac. 292. Whether there is a meeting of the 
minds, so as to constitute an agreement to insure may be 
a question of fact for the jury. Fodor v. National Liberty 
Ins. Co. of America, (1919) 175 N. Y. Supp. 112. 






CONSTITUTION OF THE CONTRACT 7 

§ 8. Agreements to Keep Car Insured.— An agreement by 
the seller of an automobile to keep the buyer protected by 
liability insurance while using a car temporarily furnished 
him pending delivery of the car ordered is not void as against 
public policy. The seller of a Waverly electric car took in 
part payment a Stearns car, the buyer turning over to the 
seller a liability policy on the Stearns car, and in considera- 
tion thereof and of the order for the Waverly, the seller oral- 
ly agreed to keep in force, to cover the buyer, a policy of 
liability insurance on a car which was given to him to use 
until the Waverly was ready for delivery. An accident 
happened while the buyer was using the temporary car, and 
a judgment was recovered against him. It was held that he 
could recover the amount thereof from the seller under the 
oral agreement to keep him insured. Ford v. Stevens Motor 
Car Co. (Mo. App. 1920) 220 S. W. 980. 

§ 9. Prior Negotiations. — The policy is a complete instru- 
ment. It cannot be varied or modified by prior negotiations 
between the insured and the insurance company's general 
agents, or overcome by invoking the aid of the doctrines of 
waiver and estoppel based on his interviews at any time 
with the company's agents after he received and accepted the 
policy. Preliminary conversations between the insured and 
the general agents before he ordered a fire policy and con- 
versations after the issuance and before the fire, as well as 
conversations following the fire, are therefore held rightly 
excluded in an action on the policy. Cass v. American Cen- 
tral Ins. Co. (1920)— Mass.— 128 N. E. 716. 

§ 10. Insured's Failure to Read Policy Immaterial. — It is 

of no consequence that an insured did not read a fire policy 
delivered to him, or the accompanying rider or riders, or 
"know a single condition in it," but accepted and kept it in 
his safe until the fire. He is bound by the contract into 
which he voluntarily entered. Cass v. American Central 
Ins. Co. (1920)— Mass.— 128 N. E. 716. 



8 AUTOMOBILE INSURANCE LAW 

§ 11. Renewals — New Car.— A renewal of a policy is, in 
effect, a new contract of insurance, being, unless otherwise 
expressed, on the same terms and conditions as were con- 
tained in the original policy. Palmer v. Bull Dog Ins. Assn. 
(1920) 249 111. 287, 128 N. E. 499. Where a theft policy with 
a mutual insurance company provides that if the insured car 
is disposed of and another purchased the owner, to insure 
the new car, must give the company notice and pay a fee 
"when a contract, to be attached, to the subscriber's certifi- 
cate, will be issued" if the new automobile is approved by the 
insurer, the insurance on the new car does not relate back 
to the time the application was made, and if the new car is 
stolen before the application is approved there can be no 
recovery. The owner of an automobile covered by a theft 
policy containing such a provision sold the car and purchased 
a new one in June 1917. On August 7, 1917, about 3 o'clock 
he mailed a request to the insurance company to trans- 
fer the policy to the new car. Between 7 and 9 p. m. on 
the same day the car was stolen. On August 8 the transfer 
was approved and mailed to the insured. In an action on the 
policy it was held that there was no liability since the risk 
could not have attached to the new automobile until the 
application had been accepted on August 8 and that was after 
the car had been stolen. Palmer v. Bull Dog Auto Ins. 
Assn. (1920), 294 111. 287, 128 N. E. 499. 



CHAPTER II. 

Construction of Policy 

§ 12. Where Policy Unambiguous. 

§ 13. Question of Ambiguity Remains for Court of Appeals. 

§ 14. Construction of Ambiguous Clauses. 

§ 15. Practical Construction by Parties. 

§ 16. One Form Not to be Used to Aid Construction of Another. 

§ 17. Effect of Rider. 

§ 18. Deductible Clause. 

§ 12. Where Policy Unambiguous. — Contracts of automo- 
bile insurance, like other contracts, are to be construed ac- 
cording to the sense and meaning of the terms which the 
parties have used, and if they are clear and unambiguous, 
the terms are to be taken in their plain and proper sense. 
McClung (to use Union Casualty Insurance Co.) v. Pennsyl- 
vania Taximeter Cab Co., (1916) 25 Pa. Dist. 583; Crowell v. 
Maryland Motor Car Insurance Co., (1915) 169 N. C. 35. 
While it is true that insurance contracts should be construed 
most strongly against the insurer, yet they are subject to 
the same rules of construction applied to the language of 
any other contract. It is a fundamental rule that the lan- 
guage of a contract is to be accorded its popular and usual 
significance. It is not permissible to impute an unusual 
meaning to language used in a contract of insurance any 
more than to the language of any other contract. Bell v. 
American Insurance Co. (1921)— Wis.— 181 N. W. 733. Where 
there is no ambiguity in the terms of an insurance contract, 
neither party can be favored in its construction, and if the 
stipulations are such as the parties might lawfully make, it 
is the duty of the court to enforce them. Dimmick v. Aetna 
Insurance Co. (1919) 213 111. App. 467; Wampler v. British 
Empire Underwriters Agency (1920) 54 Dominion L. R. 657. 



10 AUTOMOBILE INSURANCE LAW 

A clause in a fire policy in favor of a dealer, declaring the 
policy "to attach and cover upon automobiles, chassis, tops 
or other equipment, while attached to and a part of auto- 
mobiles owned by the assured and held by him for sale," 
until the time of delivery to the purchaser, is not ambiguous 
and open to explanation/ and it is not necessary, therefore, 
that the understanding of the parties as to the character of 
the property actually covered or to be covered should be 
passed upon by the jury in an action on the policy. The 
words are to receive their ordinary meaning; and the auto- 
mobiles could not be classified thereunder as comprising "new 
cars, second-hand cars and junk cars/' some of which it was 
mutually understood the plaintiff did not intend to insure. 
Cass v. American Ins. Co. (1920)— Mass.— 128 N. E. 716. 

§ 13. Question of Ambiguity Remains for Court of Ap- 
peals. — If the terms of the policy are unambiguous, its con- 
struction is a question of law for the court. This question, 
the New York Court of Appeals holds, survives the unani- 
mous decision of the Appellate Division and is subject to 
review by the Court of Appeals, which also decides the ques- 
tion as to ambiguity. The court said: "The fact that the 
courts below have read the policy otherwise and found it 
susceptible of another meaning is urged as establishing the 
fact that reasonable and intelligent men may honestly differ 
as to its meaning, and that it must, therefore, be construed 
against the insurer. It is, however, for this court to say, as 
matter of law, whether reasonable men may reasonably dif- 
fer as to such meaning, or whether the indulgence of the 
lower courts has not written a new contract for the parties 
and extended the defendant's liability beyond the plain and 
unambiguous language of the policy. As a legal proposition, 
we must first find that the contract is ambiguous, before we 
may apply the rules governing the construction of ambigu- 
ous contracts. " Hartigan v. Casualty Co. of America, (1919) 
227 N, Y., 175, 124 N. E. 789, reversing 178 App. Div. 942, 
165 N. Y. Supp. 894, which affirmed 161 N. Y. Supp. 145. 



CONSTRUCTION OF POLICY 11 

§ 14. Construction of Ambiguous Clauses. — The general 
rule that a condition in a policy of insurance, being the lan- 
guage of the company, must, if there by any ambiguity in 
it, be taken most strongly against the company, is followed 
in the construction of an automobile insurance policy; if 
reasonably susceptible of two interpretations it is to be con- 
strued in favor of the assured, so as not to defeat without 
plain necessity the claim to indemnity which it was the ob- 
ject to secure. Utterback-Gleason Co. v. Standard Ace. Ins. 
Co. of Detroit, (1920) 179 N. Y. Supp. 836; Crowell v. Mary- 
land Motor Car Insurance Co. (1915) 169 N. C. 35; Kunkle 
v. Union Casualty Co. (1916) 62 Pennsylvania Superior Ct. 
114. But this rule is not carried to the extent of construing 
the policy contrary to its manifest intention and express 
condition. Marmon Chicago Co. v. Heath, (1917) 205 111. 
App. 605. 

§ 15. Practical Construction by Parties. — In construing 
a policy resort can only be made to its practical construction 
by the parties thereto where there is some degree of ob- 
scurity or doubt in the language employed. Evidence of the 
practical construction placed upon the policy by the parties 
was held admissible where the policy contained a provision 
which exempted the insurer from liability where the injury 
occurs while the car mentioned in the policy was "being 
driven by any person under sixteen years of age/' or while 
such car "is being used for any other purpose than that 
specified in the schedule. ,, The court said: "The schedule 
referred to describes the permissible use of the car as being 
*fo,r business calls and pleasure.' Does the exemption of the 
insurer where the driver is under sixteen years of age imply 
an admitted liability where the driver is a member of the 
family of the insured over sixteen years of age? Again, the 
limitation of the use of the car to 'business calls and pleas- 
ure' is very general and indefinite, if not elastic, and affords a 
very appropriate instance for considering the attitude and 
conduct of the insurer with reference thereto. Are the 'busi- 



12 AUTOMOBILE INSURANCE LAW 

ness calls' mentioned those strictly personal to the owner, 
or do they include those of his wife and children and mem- 
bers of his family? Is the use of the car for 'pleasure' a 
use for his pleasure alone, or does it include use by members 
of his family over sixteen years of age for their pleasure, 
or for the pleasure of their guests and friends to whom they 
extend the ordinary courtesies of social life? Again, there 
is a clause of the policy which provides that when any acci- 
dent happens, the assured shall at once notify the company; 
and, if 'any claim is made on account of such accident/ like 
notice shall be given; and 'if any suit is brought to enforce 
such a claim/ the company, on notice thereof, "shall defend 
such suit/ etc. The terms 'any accident/ 'any claim/ and 
'any suit' are very broad; and although, when construed 
solely in connection with all the terms of the policy, and 
without reference to extrinsic circumsances, they could 
properly be restricted within the narrow limits for which 
appellant contends, yet such limitations are not so clearly 
expressed as to exclude all room for construction. In other 
words, if the language be open to construction at all, we can 
conceive of no sound reason for not applying the rule as to 
practical construction of the parties, if there be any evidence 
showing such fact." Fullerton v. United States Casualty 
Co., (1918) 184 Iowa 219, 167 N. W. 700. 

§ 16. One Form May Not Be Used to Aid Construction of 
Another. — The introduction in evidence of a form of insur- 
ance policy sometimes used by the defendant insurance com- 
pany and which specifically excludes "damage caused by 
striking any portion of the roadbed or by striking the rails 
or ties of street, steam, or electric railroads," throws no light 
on the proper construction of a collision policy which does not 
contain such an exception, and therefore is held to raise no 
presumption that the one policy covers anything specifically 

excluded by the other. Bell v. American Insurance Co., 

(1921)— Wis.— 181 N. W. 733. 



CONSTRUCTION OF POLICY 13 

§ 17. Effect of Rider. — A clause of a rider to a policy may- 
declare that the agreements and stipulations contained in the 
rider cancel and replace anything to the contrary printed in 
the policy, and in such case the clauses of the rider will 
prevail. Cass v. American Central Ins. Co. (1920) — Mass. — 128 
N. E. 716. 

§ 18. Deductible Clause. — A provision to the effect that 
from the amount of each claim when determined the sum of 
$25 shall be deducted and reciting that "the company shall 
be liable for loss or damage in excess of that amount only 
"clearly restricts the indemnity paya,ble to such an amount 
as appears in excess of $25. " Stix v. Travelers' Indemnity 
Co. of Hartford (1913) 175 Mo. App. 171, 157 S. W. 870. 



CHAPTER III. 

Reformation and Cancellation. 

§ 19. Reformation of Policy for Mutual Mistake. 

§ 20. Same. 

§ 21. Cancellation of Policy — Necessity for Surrender. 

§21a. Notice of Cancellation. 

§ 22. Waiver of Condition as to Return of Premium. 

§ 23. Waiver of Cancellation Provisions. 

§ 19. Reformation of Policy for Mutual Mistake. — To be 

entitled to reformation of a policy for mistake, the party 
asking it must show, not only that the alleged mistake oc- 
curred, but also that it was mutual. In other words, it must 
be made to appear that, by mistake, the contract as written 
fails to express the mutual intent*' of the parties; and if the 
mistake is denied, the fact must be established by a clear 
and satisfactory preponderance of the evidence. Vague and 
uncertain statements of the insured of what occurred when 
the insurance was taken out will not alone establish mutual 
mistake in the 1 terms of the policy as written; but the cir- 
cumstances attending the transaction, together with the 
practical interpretation put upon the policy by both parties 
may be taken into consideration. In an action seeking re- 
formation of an indemnity policy over a car described in the 
policy as being "for business and pleasure" so as to cover 
injuries by the car when driven by a servant or any member 
of the insured's family, it appeared that after an accident 
from collision, occurring when an adult but dependent son 
of the insured was driving, the company took charge of ne- 
gotiations for settlement and did settle with two of the, in- 
jured persons. It sought a similar settlement with the third, 
but failed) to reach an agreement on terms ; and when such 
person brought suit against the insured's son, the driver of 

14 



REFORMATION AND CANCELLATION 15 

the car, it took up the defense, which it subsequently aban- 
doned on the ground that the claim therein was not covered 
by the policy. It was held that, since the plaintiff believed 
and acted upon the belief that his policy covered a case of 
this kind, and the company gave him every reason to under- 
stand that such was its own construction of their contract, 
the insured was entitled to reformation of the policy, if 
that was necessary to enable him to recover thereon. Fuller- 
ton v. United States Casualty Co., (1918) 184 Iowa 219, 167 
N. W. 700. 

§ 20. Same. — An owner wished to insure against damage 
to his car by direct collision, but, by mistake of himself and 
the insurance company's local agent, who, under the evidence, 
had no authority to make a binding contract of insurance, 
attached the wrong rider, insuring against liability for dam- 
age to the property of others by collision. About a month 
thereafter the insured's car was injured by coming into col- 
lision with an obstacle in the road. On claiming for the 
loss he was informed by the company that it was not covered 
by the policy. The* claim being a small one, the company 
settled it, its manager explaining to the insured at the time 
that there was a different rate of premium covering damages 
to his own machine. "This matter being thus adjusted, 
Browne (the owner of the car) took no step either to re- 
scind his policy, or to request the company to issue to him 
a new one which would without question insure him against 
damage to his automobile through direct collision ; and mat- 
ters remained in that condition when, in September of the 
same year, while being driven by himself, his automobile 
came into collision with another vehicle and was damaged 
to the extent of $1,350. He made claim upon the company 
for this amount, and was refused payment upon the ground 
that in the opinion of the company such a loss was not 
covered by the policy." Browne sued the company on the 
policy, and for its reformation if that was necessary to en- 
title him to recovery. The company contended that the 



16 AUTOMOBILE INSURANCE LAW 

policy issued to Browne was the one he applied for; that it 
did not cover the loss sought to be covered, and that in any 
event, after the first accident and its settlement, Browne, by 
retaining his policy and not offering to pay the additional 
premium chargeable upon a policy of the kind claimed to 
have been requested, was in no position to ask for reforma- 
tion of his policy. Browne contended that it was the inten- 
tion of the parties by their contract to insure him against 
damage to his automobile, and that he, having paid the pre- 
mium demanded by the company, was entitled to have the 
policy reformed so as* to cover such damage; and further, 
that the company by its action in recognizing and paying the 
first claim, and not at that time canceling the policy, was 
estopped to deny that the policy covered the loss sought to 
be recovered. It was held that the plaintiff was not en- 
titled to reformation of the policy, and that the company 
was not estoppel to deny that it was liable for the amount 
claimed. The first claim, which the company settled, "was 
for a small amount ; and nothing was more natural than that 
the manager of the company, recognizing that the plaintiff 
had been misled by the company's agent into applying for a 
policy different from the one he desired, should be willing to 
make plaintiff whole up to that time without additional charge ; 
but no inference could properly be drawn therefrom that he 
was willing that such losses should be recognized in the 
future now that Browne no longer labored under any mis- 
apprehension or mistake. The true reason for the plaintiff's 
inaction suggested by the evidence is rather that he was 
still of the opinion that his policy covered the character of 
loss in dispute, and that if the question ever came to be 
litigated the courts would sustain his view. The circum- 
stances attending the settlement by the company of Browne's 
first loss are entirely insufficient to constitute an estoppel as 
against the defendant, nor was such estoppel an issue in the 
case." Browne v. Commercial Union Assurance Co. (1916) 
30 Cal. App. 547, 158 Pac. 765. Where in an action on a 



REFORMATION AND CANCELLATION 17 

policy for the loss of the insured automobile destroyed in a 
collision, the only defense was that the provision in the 
policy against loss or damage by collision had been left in 
the policy by mutual mistake, and the preponderance of the 
evidence was in favor of the defendant company's plea, it 
was held that the question was one for the jury. Drew v. 
American Automobile Ins. Co. (Tex. Civ. App. 1918) 207 
S. W. 547; see also §30. Limits of Agent's Authority. 

21. Cancellation of Policy — Necessity for Surrender. — 

A provision in an automobile insurance policy that the un- 
earned premium shall be returned on the cancellation of the 
insurance only on the surrender of the policy is a reasonable 
requirement ; and in an action for unearned premiums a 
nonsuit is held properly entered where the insured has failed 
to return his policy upon the cancellation of the insurance. 
A policy provided: "This policy shall be cancelled at any 
time at the request of the insured, or by the company by giv- 
ing five days' notice of such cancellation. If this policy shall 
be cancelled as hereinbefore provided or become void or 
cease, the premium having been actually paid, the unearned 
portion shall be returned on surrender of this policy or 
last renewal, this company retaining the customary short 
rate." It was held that the right of an insured to demand 
the return of the premium is wholly dependent upon the 
covenants of the policy. Where an insured undertakes to 
cancel the policy under a covenant such as that above quoted, 
he has no right to demand a return of the unearned portion 
of the premium until he has surrendered the policy. This is 
a reasonable requirement, for if the policy were suffered to 
remain in the possession of the insured the company would, 
in case of a loss, be subject to the risk of having it asserted 
that the negotiations for the cancellation of the policy 
never had been completed or that some officer of the com- 
pany had agreed to a revocation of the cancellation and ac- 
cepted a repayment of the premium. Healy v. Stuyvesant 
Insurance Co., (1918), 72 Pa. Superior Ct. 168. Where there 



18 AUTOMOBILE INSURANCE LAW 

was a conflict in the evidence with reference to whether or 
not there had been, subsequent to the issuance of an automo- 
bile policy, a cancellation of the collision features agreed 
upon by both the insured and the insurer, the question was 
held, in an action on the policy following a collision, to be 
one for the jury. Drew v. American Automobile Ins. Co. 
(1918) Tex. Civ. App. 207 S. W. 547. 

§21a. Notice of Cancellation. — A fire policy provided that 
the policy might be canceled on written notice by either 
party stating when the cancellation should be effective, "notice 
of cancellation deposited in the United States mail, postage 
prepaid, to the address of the assured." to be sufficient ; a 
check for the unearned premium, similarly mailed, being suf- 
ficient tender thereof. The insurance company sent a regis- 
tered letter to the insured at his residence, notifying him of 
cancellation of the policy. The insured was out of town and 
the letter was returned pursuant to the printed request to 
return in five days. The insured returned within a month. 
His automobile was burned within three months, the period 
for which the postmaster is authorized by the federal statute, 
Rev. St. §3936 ,to hold ordinary letters if he believes they can 
be delivered. In an action on the policy it was held that the 
notice of cancellation was not sufficient, the company's re- 
quest to return the letter within five days having lessened the 
insured's chance of receiving the notice. American Automo- 
bile Insurance Co. v. Watts (1914) 12 Ala. App. 518, 67 So. 758. 

§ 22. Waiver of Condition as to Return of Premium, — In 

a stipulation in a policy, authorizing cancellation of a policy 
by the insurance company, on tendering the pro rata un- 
earned premium, the requirement as to tendering the pre- 
mium is inserted for the benefit of the insured and may be 
waived by him. In a case where the company failed to pay 
the unearned premium on the surrender of a policy contain- 
ing such a cancellation clause (Buckley v. Citizens' Insur- 
ance Co., 188 N. Y. 399, 81^ N. E. 165) the court said: "The 
one object for the cancellation clause i3 to place the policy 



REFORMATION AND CANCELLATION 19 

in the custody of the insurance company absolutely and un- 
conditionally. If the insured permits this to be done by his 
voluntary act when the company gives notice of cancellation 
without receiving from it the unearned premium he assents to 
cancellation, but can sue for the amount due him." It is im- 
material that there is no written notice of cancellation. If 
the insured, having knowledge of the company's intention to 
cancel the policy, voluntarily surrenders it unconditionally 
for that purpose, the policy is cancelled, though the unearned 
premium is not tendered back. Hancock v. Hartford Fire 
Insurance Co. (1913) 81 Misc. (N. Y.) 159, 142 N. Y. Supp. 
352, affirmed 145 N. Y. Supp. 1126. 

§ 23. Waiver of Cancellation Provisions. — It is held that 
the clause of the Ohio statute (Section 9577 Consolidated 
Code), requiring the insertion in every fire policy of an obli- 
gation to cancel it upon the written request of the insured, 
is limited in its effect to policies governing property in Ohio, 
and a provision in a contract for insuring automobiles, though 
entered into in Ohio, waiving the provisions in the policies 
for cancellation is valid, the automobiles not being located in 
that state. Automobile Insurance Co. of Hartford, Conn., v. 
Guaranty Securities Corp. (1917) 240 Fed. 222. The Con- 
necticut standard form of policy, which contains a cancella- 
tion clause and must be used under the Connecticut laws^ 
may contain upon separate slips or riders to be attached to 
the policy provisions adding to or modifying those contained 
in the policy (Section 3497 Conn. Gen. Stat. 1902). A waiver 
by agreement of the parties to a contract for the insurance 
of many automobiles of the provision for cancellation would 
therefore seem to be good under the Connecticut law. Auto- 
mobile Insurance Co. of Hartford, Conn., v. Guaranty Se- 
curities Corp. (1917), 240 Fed. 222. 

A company engaged in the business of financing the retail 
sale of automobiles by advancing money to the dealers en- 
tered into a contract with an insurance company to insure 
the machines for three years, the contract providing that 



20 AUTOMOBILE INSURANCE LAW 

the cancellation provisions in the policies should be waived. 
Before the termination of the contract the finance company 
sought to repudiate it and enter into a similar arrangement 
with another insurance company. The first company sought 
an injunction. It was held that, as the methods of adjust- 
ment of the second company might not be the same as those 
of the first, so that their profits might not be any certain 
basis of what the first company would have made out of 
the original contract if it had been allowed to perform it, 
the first company was entitled to a preliminary injunction to 
restrain the breach of contract. Automobile Insurance Co. of 
Hartford, Conn. v. Guaranty Securities Corp. (1917) 240 Fed. 
222. 



CHAPTER IV 

Notice and Proofs of Loss 

§ 24. Necessity for Notice and Proofs of Loss. 

§ 25. Time for Notice and Proofs of Loss. 

§ 26. Evidence of Receipt of Proofs by Company. 

§ 27. Waiver of Notice and Proofs of Loss. 

§ 28. Question of Waiver for Jury. 

§24. Necessity for Notice and Proofs of Loss. — In the 

absence of evidence of a waiver by the defendant insurance 
company of the requirement of the policy as to notice and 
proofs of loss, lack of compliance with such requirement will 
preclude recovery on the policy. Gallagher v. American Alli- 
ance Insurance Co. of New York (1921) — 111. App. — 

But to have this effect, some of the later cases hold that 
either the service must be made a condition precedent to the 
liability of the coimpany, or forfeiture for failure must be 
provided for by the policy. Zackwik v. Hanover Fire Ins. Co., 
(1920),— Mo. App.— 225 S. W. 135. See also Clark v. London 
Assur. Corp., (1921) — Nev.— 195 Pac. 809. 

§25. Time for Notice and Proofs of Loss. — A theft 
policy contained two conditions precedent to the liability of 
the company. One was that "in the event of loss or damage 
the assured shall forthwith give notice thereof in writing to 
this company or the authorized agent who issud this policy ;" 
second, that he "within sixty days thereafter, unless such time 
is extended in writing by this company, shall render a state- 
ment to this company, signed and sworn to by said assured, 
stating the knowledge and belief of the assured as to the 
time and cause of the loss or damage, the interest of the 
assured, and of all others in the property/' The policy also 
contained this provision : "It is a condition of this policy that 
failure on the part of the assured to render such sworn 
statement of loss to the company within sixty days of the 

21 



22 AUTOMOBILE INSURANCE LAW 

date of loss (unless such time is extended in writing by the 
company) shall render such claim null and void." 

In an action on the policy the insured contended that the 
automobile was stolen on October 17, 1919, in Chicago, from 
in front of a saloon where he had left it during his absence 
in the saloon for ten minutes, with, a friend; that when he 
came out it had disappeared. 

Neither by the statement nor the evidence did it appear 
that the plaintiff forthwith gave notice of his loss or made 
proof of claim within the terms and conditions of the pro- 
vision of the policy making it necessary for him, so to do as 
a condition precedent to his right of recovery. When the 
plaintiff applied to the defendant for reimbursement for loss 
under the policy, the defendant denied liability because of 
the plaintiff's failure to give notice of the theft forthwith, 
after the loss, and because no; proof of claim had ever been 
made and sent to the defendant company. It was held that 
under the circumstances the plaintiff was not entitled to re- 
cover. The giving of notice forthwith of the loss and mak- 
ing proof of the claim were held conditions precedent to the 
right to recover under the policy. There is a practical rea- 
son for such a provision; for it is common knowledge that 
quick action after the theft of an automobile may lead to 
its recovery, and that delays, tend to at least materially im- 
pair the chance of recovery of the stolen automobile, delays 
giving the thief an opportunity) to so disguise the car as to 
make identification difficult to say the least. Gallagher v. 
Alliance Insurance Co. of New York (1921) — 111. App. — citing 
Forbes Cartage Co. v. Frankfort Marine, etc. Ins. Co., 195 
111. App. 75. 

§26. Evidence of Receipt of Proofs by Company. — It is 

incumbent on the plaintiff in an action on the policy to prove 
the furnishing to defendant of a sworn proof of loss, as pro- 
vided by the terms of the policy. The law does not raise 
a presumption of the receipt of such proof because of the 
failure of the insurance company, when sued upon the policy, 



NOTICE AND PROOFS OF LOSS 23 

to prove that a sworn statement of the loss was furnished 
the company or that the company expressly waived such 
proof. Gallagher v. American Alliance Insurance Co. of New 
York (1921) — 111. App. — . Evidence of the contents of proofs of 
loss will not be admitted until evidence of the receipt of the 
proofs by the company has been introduced. Glaser v. Wil- 
liamsburg City Fire Ins. Co. (1921)— Ind. App.— 125 N. E. 787. 

§27. Waiver of Notice and Proofs of Loss. — The defense of 
noncompliance with the policy requirements of notice and 
proofs of loss may be waived by the subsequent acts of the 
insurance company's duly authorized representative. Stone v. 
American Mutual Auto Insurance Co. (1921) — Mich. — 181 N. 
W. 973. Although a policy requires sworn proof of loss it is 
held that the insured has a right to rely upon the assurance 
of the company's agent that the insured's written notice of the 
loss was sufficient, and that no further notice or proof need be 
given. O'Connor v. Maryland Motor Insurance Co., (1919) 
287 111. 204, 122 N. E. 489. Where no proof of loss had been 
filed with the company in accordance with the terms of the 
policy the trial court permitted the introduction of a state- 
ment written by the adjuster of the company summoned by 
the agent of the company to whom the fire loss had been 
reported, which the adjuster stated had been written by him 
in the presence of the plaintiff insured from the story told 
him by the plaintiff relative to the fire, and was immediately 
signed by the plaintiff. Dunn v. First National Fire Insur- 
ance Co. (1918) 14 Schuylkill (Pa.) Legal Record 389. But 
the representative must be one duly authorized to do the 
acts claimed as waiver. An automobile insured against loss 
or damage by fire was damaged by fire and the local agent 
of the insurance company inspected it next day, after which 
he furnished the insured blanks for proof of loss. There 
was no evidence that the local agent had any authority to 
make adjustment of the loss, or that any other agent or 
officer of the insurance company did anything looking to an 
adjustment of the loss, or that could be construed as a waiver 



24 AUTOMOBILE INSURANCE LAW 

of proof of loss. It was held there was no waiver of proofs 
of loss required by law and by the terms of the policy. 
Glaser v. Williamsburg City Fire Ins. Co. (1921) — Ind. App. — 
125 N. E. 787. If a defendant insurance company disclaims 
absolutely that it issued any theft policy of an earlier date 
than that on which the automobile was stolen, the plaintiff 
is relieved from the necessity of presenting proofs of loss. 
Fodor v National Liberty Ins. Co. of America, (1919) 175 
N. Y. Supp. 112. Where the insured under a theft policy, 
nine days after the disappearance of a conditional vendee 
with the insured automobile, notified the insurance company 
of the loss or disappearance of the automobile, and within 
60 days from the date of the loss the company denied liability 
on the ground that the policy did not cover embezzlement 
or wrongful conversion, the company was held to have 
waived proofs of loss. Buxton v. International Indemnity 
Co. (1920)— Cal.— 191 Pac. 84. 

By entering into an arbitration under an automobile fire 
policy stipulation therefor within the time allowed for proof 
of loss, the insurance company was held to waive all question 
as to the fact and sufficiency of the proof of loss. Union 
Marine Insurance Co. v. Charlie's Transfer Co. (1914) 186 
Ala. 443, 65 So. 78. 

Settlement by the insurance company with the mortgagee 
of an insured automobile insured under the policy for his 
interest is not a waiver of proofs of loss 'on the part of the 
insured owner. Glaser v. Williamsburg City Fire Ins. Co. 
(1920) Ind. App. 125 N. E. 787. 

§ 28. Question of Waiver for Jury. — In an action on a 
theft policy where the plaintiff alleged that the insurance 
company had waived the condition of the policy as to notice 
in writing and sworn statement of loss and accepted verbal 
notice of the total loss as sufficient, it was held that the 
question of waiver was properly submitted to the jury. 
More v. Continental Insurance Co., (1915) 169 App. Div. 
914, 154 N. Y. Supp. 1134, affirmed 222 N. Y. 607. 



CHAPTER V. 

Agents, Brokers and Adjusters 

§29. Authority of Local Agent. 

§ 30. Limits of Agent's Authority. 

§31. Agent for Disclosed Principal. 

§32. Agent for Undisclosed Principal. 

§ 33. Broker's Authority to Act for Company. 

§ 34. Adjuster Cannot Delegate Powers. 

§ 35. Broker or Agent as Insured's Agent. 

§ 36. Adjuster's Authority to Admit Liability. 

§ 29. Authority of Local Agent. — In an action to reform 
an automobile insurance policy the question arose as to the 
authority of a local agent to bind the company by attaching 
the wrong rider to the policy. The agent's letter of appoint- 
ment was in the following terms : 

"Automobile Insurance. 
"On the nomination of special agent, Mr. F. J. H. 
Manning, you are hereby appointed agent of the Com- 
mercial Union Assurance Co. Ltd., for the transaction 
of automobile insurance in Salinas, subject to such in- 
structions as may be given you from time to time by 
this office. 

"The rate of your commission will be 15 per cent. 
"Policies will be written at this office, and will be sent 
to you promptly upon receipt of application. 

"Yours truly, 

"E. I. Niebling, Manager." 

The agent was supplied by the company with blank forms 
of application and riders. Acting under his letter of ap- 
pointment he received applications, forwarded them to the 
company at its office in San Francisco, which, if the risk 
applied for was accepted, issued a policy, and sent it to the 
agent, who delivered it to the insured, collecting the premium 
therefor. 

25 



26 AUTOMOBILE INSURANCE LAW 

It was held that the agent, under these facts, had no au- 
thority to make a binding contract of insurance; that the 
general language of the letter appointing him as agent "for 
the transaction of automobile insurance "was to be construed 
in connection with the further language of the letter: 
"Policies will be written at this office," and with the conduct 
of the parties under it. There was no question in the case 
of ostensible agency ; and the evidence as to what took place 
between the agent and the plaintiff at the time of the appli- 
cation for the policy clearly showed that the agent was doing 
nothing more than preparing the plaintiff's application for 
the purpose of forwarding it to the insurance company. The 
court said: "The word 'written' in the phrase, 'Policies will 
be written at this office/ evidently means something more 
than the mere physical act of filling in the blanks of an in- 
surance policy. Insurance 'written' is insurance contracted 
for. Consequently the consummation of the contract in 
controversy was held to be dependent upon its ultimately 
being written at the general office in San Francisco. There 
was, therefore, no completed contract of insurance until the 
policy applied for was written and delivered; and it is settled 
that the authority to complete contracts primarily differen- 
tiates a general agent having power to bind his principal 
from mere soliciting agents and other intermediaries operat- 
ing between the insured and the insurer, who have authority 
only to initiate contracts, and consequently cannot bind 
their principals by anything they may say or do during the 
preliminary negotiations." Browne v. Commercial Union 
Assurance Co. of London (1916) 30 Cal. App. 547. 

§ 30. Limits of Agent's Authority.— An automobile hiring 
company obtained from the Wilkerson Insurance Agency, of 
Vicksburg, a fire policy on a certain car. The risk was 
originally written by the Firemen's Fund Insurance Co., but 
that company, for some reason, ordered its agency to cancel 
the policy. The Wilkerson Agency did not represent any 
company which would rewrite the risk; so, in accordance 



AGENTS, BROKERS AND ADJUSTERS 27 

with a custom or understanding between the insurance 
agents of Vicksburg, it solicited the Flowers Agency, the 
regular agents of the Hartford Fire Ins. Co., to issue a policy. 
This was done, and the policy delivered to the Wilkerson 
Agency and by them to the insured. The policy had Wilker- 
son's sticker on it. The Wilkerson Agency paid the pre- 
mium, and by a custom of dealing the two agencies divided 
the commission. Neither the agencies nor the insured read 
the policy, which, after the destruction of the car by fire 
six months later, was discovered to cover the car only while 
it was in the garage, and did not cover the loss. The insured, 
in an action for reformation of the policy, claimed that the 
contract made by them was for a policy exactly like the one 
canceled, which would have covered the loss. 

There was evidence that the insured knew when they re- 
ceived the policy that the Flowers Agency was the Hart- 
ford's agents and that the Wilkerson Agency was not; that 
they knew the policy delivered was the only policy the Hart- 
ford would write on the car, and that its agent had no au- 
thority to write a policy like that canceled. In other words, 
the evidence showed that the limitation placed by the Hart- 
ford upon its agents was known to the plaintiff when it ac- 
cepted the Hartford policy. There being no warrant for 
holding that a principal can be bound by the unauthorized 
acts of his agent, and known to the party dealing with the 
agent to be in direct violation of the instructions of the 
principal, the insured was held not entitled to reformation 
of the policy. Mississippi Electric Co. v. Hartford Fire Ins. 
Co. (1913) 105 Miss. 767, 63 So. 231. 

§ 31. Agent for Disclosed Principal. — The general principle 
of law applies that where an agent acts within the scope of 
his authority for a disclosed principal he does not bind him- 
self unless it appears that he expressly agreed to become 
personally responsible. Cass v. Lord (1920)— Mass.— 128 N. E. 
716. In an action against insurance agents individually it 
was alleged in substance that the defendants verbally agreed 



28 AUTOMOBILE INSURANCE LAW 

to procure and deliver a valid policy of insurance against fire 
upon automobiles from time to time owned by the plaintiff 
in his business, or to insure such automobiles as the plaintiff 
might from time to time own and have in hand in connection 
with his business as an "automobile dealer," or to procure and 
deliver to the plaintiff a valid policy of insurance upon auto- 
mobiles from time to time owned by the plaintiff in his busi- 
ness and in the meantime "to insure such automobiles them- 
selves. " The defendants procured from an insurance company 
and delivered a policy binding the parties according to its 
terms. Having done so, the plaintiff was forced to take the 
position that, independently of their principal, they also 
agreed to become personally liable as indemnitors, and acting 
solely for themselves to insure his property. 

The plaintiff's own uncontradicted statements and admis- 
sions of his contractual relations with the defendants were : 
"I knew that they were general agents and dealt with them 
as such. I did not expect they were going to insure my 
car themselves. * * * I relied on such contract they were to 
get for me from the insurance company. " It also appeared 
that all premiums were paid to the defendants as general 
agents of the company. This evidence was held insufficient 
to warrant a finding that the defendants had bound them- 
selves individually, and the plaintiff could not recover from 
them for a breach of the contract. Cass v. Lord (1920) 
—Mass.— 128 N. E. 717. 

§ 32. Agent for Undisclosed Principal. — In an action to 
recover under an automobile insurance policy signed "New 
Jersey Indemnity Company, Attorney in Fact/' and by the 
terms of which policy "subscribers to Motor Car Under- 
writers at New Jersey Indemnity Exchange severally agree 
to indemnify the subscriber named herein," the amount of 
loss to be ascertained by the subscriber and the attorney in 
fact, while the policy was regarded by the court as an 
anomalous one, it was held to be a contract by an agent for 



AGENTS, BROKERS AND ADJUSTERS 29 

unnamed principals, and the attorney in fact was liable on 
the policy. Solomon v. New Jersey Indemnity Co. (1920) 
— N. J. L.— 110 Atl. 813. 

§ 33. Broker's Authority to Act for Insurance Company. 

— Where brokers, who wrote a firm that their letter would 
protect the firm from fire or theft over specified cars, the cov- 
erings being in a named insurance company, had never acted 
as agents of the insurance company up v to that time or had 
any business with the company, or had represented to the 
firm that they had any authority to act for the company, 
the case was not one of undisclosed principal, and the com- 
pany was not bound by their letter. Cranston v. California 
Insurance Co. (1919) 94 Or. 369, 185 Pac. 292. The fact that 
an insurance broker solicited from the owner of an auto- 
mobile an application for a fire and theft policy and obtained 
from an insurance company's agent the policy which was 
issued did not constitute him the agent of the insurance com- 
pany, with authority to renew the policy by oral contract. 
Sheridan v. Massachusetts Fire & Marine Ins. Co. (1918) 
233 Mass., 479, 124 N. E. 249. 

The sending by the insurance company's agent of a notice 
of the expiration of a fire and theft policy to the broker who 
had procured the original policy was not evidence from which 
it could be found that the insurance company ■ had clothed 
the broker with authority to bind the company by an oral 
contract of insurance or by an agreement to insure. And 
statements by a broker to an owner, after the expiration of 
his fire and theft policy, that the owner would be held covered 
were inadmissible to show the broker's agency for the in- 
surance company which had issued the original policy, and 
could not be binding upon that company. Sheridan v. Massa- 
chusetts Fire & Marine Ins. Co., (1918) 233 Mass. 479, 124 
N. E. 249. 

§ 34. Adjuster Cannot Delegate Powers. — An insurance 
adjuster, to whom the settlement of the amount of loss under 
an automobile theft policy has been referred by the insur- 



30 AUTOMOBILE INSURANCE LAW 

ance company, cannot, without express authority from the 
company, delegate to an impartial and competent third party 
all his powers as an adjuster and make the company liable 
for damages not covered by the policy. Consequently it is 
held that an adjuster for an insurance company of the loss 
sustained under a policy insuring against loss or damage 
by theft, robbery or pilferage in excess of $25 has no author- 
ity to bind the company by an agreement with the insured 
that the company will pay for putting the car, which had 
been in use for two years, and had been damaged before 
the theft and which was recovered after the theft, into per- 
fect repair. The court said: 

"One Church, a member of a firm of insurance adjusters, 
after looking over the car did not agree with the estimate 
of damages furnished by the plaintiff's expert. He suggested 
that the plaintiff take or send his car to the Ford service 
station in Cambridge, and leave it to the persons there in 
charge to determine what damage was done and to make 
the repairs. On the testimony of Church the agreement be- 
tween them was that the insurance company should pay for 
putting the car in as good condition as it was in before it 
was stolen. Although the plaintiff, during his cross-examina- 
tion, corroborated this, yet there was some evidence for the 
jury that the adjuster agreed that the company would pay 
for putting the machine 'into perfect repair.' The assistant 
superintendent of the Ford service station testified that the 
plaintiff ordered new parts, and 'wanted the car put in as 
good condition as new ;' and, in substance, that the repairs 
actually made were due to the wear and tear and old age 
of the car, not to the damage sustained on account of the 
theft. Chisholm v. Royal Insurance Co., Ltd., (1917) 22,5 
Mass. 428, 114 N. E. 715. The court said: "Under its con- 
tract the defendant insured the plaintiff against the loss or 
damage due to the theft of his automobile. In the absence 
of evidence as to the actual authority of the adjuster, it is 
to be assumed that he had power to bind the company in 
the ascertainment of what that damage was, and in adjust- 



AGENTS, BROKERS AND ADJUSTERS 31 

ing the cost of repairing it. See Searle v. Dwelling House 
Ins. Co. 152 Mass 263. The condition of the automobile, 
so far as not apparent, could be ascertained by proper ex- 
amination. It would be obvious that in some particulars 
this condition could not be due to the recent theft; while 
some other items of the damage naturally would be attribut- 
ed to the conduct of the thieves during the three or four 
hours they had the car. The only question open to dispute 
would relate to a few items which might or might not be 
attributed to the conduct of the thieves. Even assuming 
(the defendant having waived the provision relating to ap- 
praisal) that the adjuster had authority to refer this de- 
batable question to the Ford company as an impartial and 
competent third party, he could not, on the facts disclosed, 
bind the defendant by an alleged agreement which purported 
not only to delegate to the third party all his powers as an 
adjuster, but to make the insurance company liable for 
damages that plainly were not covered by the policy. Church 
had authority only to ascertain and adjust the loss sustained 
by the theft of the automobile ; and there is nothing in the 
record to show that the company ratified his alleged agree- 
ment to give the plaintiff a practically new car, or that it 
waived the provision of the policy limiting its liability to 
the actual cost of repairing, or, if necessary, replacing the 
parts damaged or destroyed by the theft." 

§ 35. Broker or Agent as Insured's Agent. — The well 
settled rule applies, in cases relating to automobile insurance 
policies, that where an insurance broker requests insurance 
from a company which he does not represent he is acting for 
the insured, who is responsible for misrepresentations in the 
application made out by the broker. Solomon v. Federal In- 
surance Co., (1917) 176 Cal. 133, 167 Pac. 859. 

In an action against an insurance company the plaintiffs 
alleged the execution and delivery to them by a firm of in- 
surance brokers of a certificate of insurance in the following 
terms : "Pending receipt of our covering notes this will serve 



32 AUTOMOBILE INSURANCE LAW 

to protect you against loss or damage resulting from fire 
or theft on the following cars in the amount indicated from 
noon of this date, said coverings being in the California Fire 
Insurance Company, viz : 

"Studebaker Six 17 Series No. 645,718, $970. 100, rate 
1.25. * * * (Signed) Hughes & Co." 

but that no recovering notes were ever issued. 

It was held that on its face the instrument pleaded did not 
amount to anything except the personal promise of Hughes 
& Company. It indicated nothing more than that Hughes 
& Company promised as an insurance broker to procure from 
the defendant certain insurance in favor of the plaintiffs ; 
containing no language which was binding upon the defend- 
ant it could not be given a legal effect to charge the com- 
pany. Cranston v. California Insurance Co. (1919) 94 Or. 
369, 185 Pac. 292. . 

Under the Washington insurance code, 1915, § 6059-2 et 
seq., a person, not an appointed agent of an insurance com- 
pany, who acts in any manner in negotiating contracts of in- 
surance for a party other than himself, is a broker, and acts 
as agent of the owner, so that his knowledge would not be 
imputed to the company. In an action on an automobile 
fire policy, where the defense was misrepresentations as to 
age, condition and cost, it appeared that the insured procured 
the insurance through one Fraser, who had no appointment 
or authority to solicit applications and effect insurance for 
the defendant company ; therefore he was not its agent. He 
aided in negotiating the contract of insurance with the com- 
pany; therefore he was a broker under the Washington 
statute. The fact that he acted as a broker without having 
complied with the requirements of the act by taking out a 
license did not render the insurance which he had obtained 
void or voidable, but merely rendered him personally liable 
for the penalty provided in the act for having assumed the 
functions of a broker without obtaining the proper license. 
There was nothing in the testimony to show that either the 



AGENTS, BROKERS AND ADJUSTERS 33 

company or the owner was acquainted with the fact that 
Fraser was not possessed of a proper license, and, he having 
been selected by the owner, there was no reason why the 
company should be charged with the responsibility for his 
conduct. Even conceding Fraser was not a broker, it was 
held that the owner should be bound by his acts on the 
theory that he was her agent, and that the trial court should 
have determined, as a matter of law, that Fraser was either 
the agent or broker representing the owner, and any 
knowledge he had or representations he made were the 
knowledge and representations of the owner. Day v. St. 
Paul Fire & Marine Ins. Co. 1920)— Wash.— 189 Pac. 95. 

§ 36. Adjuster's Authority to Admit Liability. — When the 
insurance company was notified of a loss under an automo- 
bile fire policy, its adjuster wrote the insured that the com- 
pany could replace the property destroyed for a stated sum, 
adding, "As this represents the value of the car destroyed 
and which value is the rfiaximum of the company's liability, 
we inclose proof of loss for $750 for execution and return." 
It was held that this was an admission of liability for the 
amount stated, but where the insured did not accept that 
estimate or statement of the loss, the company's admission 
of liability was not a waiver of its right to an appraisement 
under the policy. Hart v. Springfield Fire & Marine Insur- 
ance Co. (1914) 136 La. 114, 66 So. 558. 

Under a policy containing the provision : "This company 
shall not be held to have waived any provision or condition 
of this policy, nor of this endorsement, or any forfeiture 
thereof, by any requirement, act or proceeding on its part 
relating to the appraisal or to any examination herein pro- 
vided for," a recent Canadian case holds that no act of an 
adjuster can be binding on the company to constitute a 
waiver of a defense that the loss is not covered by the policy. 
The court said that, irrespective of any provision in the 
policy on the subject, the power to bind the insurance com- 
pany by a waiver of the defense that the loss is not covered 



34 AUTOMOBILE INSURANCE LAW 

by the policy is not a necessary incident to the duties of an 
adjuster, and it would require some express authority from 
the insurance company to enable him to waive its rights or 
to estop it from setting up this defense. The insured, in 
this case, contended that, whether liable on the policy or not, 
the insurance company Was estopped by the consent and ad- 
missions of its adjuster who was sent to investigate and ad- 
just the plaintiff's claim for damage to an automobile which 
had slipped from a ferryboat into the water while being 
landed. It was alleged that the adjuster g-ave certain direc- 
tions to the repairers as to what was to be done with the 
car, and otherwise acted towards the plaintiff in a way con- 
sistent only with the assumption that the insurers were 
liable. The adjuster denied these assertions ; but, apart from 
his denial, it was held fairly clear that, when he was des- 
patched by the insurers to investigate the loss, they could 
not have been aware of the exact nature of the accident. 
In fact it would be one of his duties to investigate this, 
as well as to ascertain the amount of the damage and to 
report. It was held his action constituted no waiver or 
estoppel of the defendants. Wampler v. British Empire 
Underwriters Agency (1920) 54 Dominion Law Rep. 657, 
citing Atlas Assurance Co. v. Brownell (1899) 29 Can. 
S. C. R. 537, and Commercial Union Assurance Co. v. Marge- 
son (1899) 29 Can. S. C. R. 601. 



CHAPTER VI. 

Arbitration, Appraisal and Award 

§ 37. Waiver of Appraisal by Denial of Liability. 

§ 38. Effect of Award. 

§ 39. Appraisement Not Barred by Total Loss. 

§ 40. Effect of Bad Faith of Appraisers. 

§41. Failure of One Appraiser to Sign Award. 

§ 42. Effect of Refusal to Arbitrate. 

§ 42a. Proceedings in Appraisement. 

§ 42b. Sufficiency of Award. 

§ 37. Waiver of Appraisal by Denial of Liability. — Pro- 
visions in a policy that no right of action shall exist until 
after an appraisal, and requiring 60 days to elapse after 
notice of loss before suit is brought, are waived by the in- 
surance company's statement to the insured, when consulted 
in an endeavor to adjust the loss, that it will not do any- 
thing. Gaffey v. St. Paul Fire & Marine Insurance Co. 
(1917) 221 N. Y. 113, 116 N. E. 778, reversing 164 App. Div. 
381 ; Gross v. Germania Fire Insurance Co. (1920) 29 Pa. 
Dist. Ct. 879. 

§ 38. Effect of A Ward. — An award made in an arbitration 
of the loss covered by an automobile fire policy merges the 
right of action on the policy and the insured is entitled to 
recover only on the award. Union Marine Insurance Co. v. 
Charlie's Transfer Co. (1914) 186 Ala. 443, 65 So. 78. 

§ 39. Appraisement Not Barred by Total Loss. — Where 
there is no state statute requiring the insurer to pay the full 
amount of the policy on a car that has been totally destroyed, 
a total destruction of the car does not render impossible 
or do away with a provision in the policy for an appraise- 
ment, stating separately the sound value and the damage, 

35 



36 AUTOMOBILE INSURANCE LAW 

and limiting the insurer's liability to the cash value of the 
machine at the time any loss or damage occurs. Hart v. 
Springfield Fire & Marine Insurance Co. (1914) 136 La., 66 
So. 558. 

§40. Effect of Bad Faith of Arbitrators. — Where abitra- 
tors are selected pursuant to the terms of a policy and make 
an award, the award may be disregarded if the arbitrators 
are guilty of bad faith, partiality, or misconduct affecting 
the result of the award. Jones v. Orient Insurance Co. 
(1914) 184 Mo. App. 402, 1917 S. W. 28. 

But unless the evidence clearly establishes that the award 
was the result of fraud or gross mistake, or to state it in 
another way, was made by appraisers who were incompetent, 
interested, or partial, the award must be sustained. Home 
Insurance Co. v. Walter (1921)— Tex. Civ. App.— 230 S. W. 
723. 

And where the appraisers have proceeded in strict ac- 
cordance with the submission, they are not competent wit- 
nesses, in a subsequent action on the policy for palpable 
mistake and fraud on the part of the insurer's appraiser, to 
impeach their own award. Eberhardt v. Federal Insurance Co., 
(1913), 14 Ga. App. 340, 80 S. E. 856. 

§41. Failure of One Appraiser to Sign Award — Where 
an automobile fire policy provided that the award of two 
appraisers and umpire, or any two of them, in the event of 
disagreement as to the amount of loss or damage, should 
determine the amount of the loss, and one appraiser failed 
to sign the award because, having fully and finally con- 
sidered the matter with his fellows, he had signified his 
dissent and absolutely refused to sign, the award signed by 
one appraiser and the umpire was admissible in evidence in 
an action on the award. Union Marine Insurance Co. v. 
Charlie's Transfer Co. (1914) 186 Ala. 433, 65 So. 78. 

§ 42. Effect of Refusal to Arbitrate. — An insurance com- 
pany is not liable for statutory penalties under the Louisiana 



ARBITRATION, APPRAISAL AND AWARD 37 

Act No. 168 of 1908 for withholding the amount of liability 
admitted by the agent or adjuster of the company, as long 
as the insured demands the payment of a larger sum and 
refuses to submit to an appraisement under the terms of 
the policy. Hart v. Springfield Fire & Marine Insurance 
Co. (1914) 136 La. 114, 66 So. 558. 

§42a. Proceedings in Appraisement. — It is not necessary 
for either party to the submission to have notice of the 
meeting of the appraisers, or an opportunity to present evi- 
dence, where there is no provision in either the policy or in 
the submission for such notice, or for the parties to have 
the opportunity to submit evidence upon the questions at 
issue. Eberhardt v. Federal Insurance Co., (1913,) 14 Ga. 
App. 340, 80 S. E. 856; Home Insurance Co. v. Walter, (1912) 
—Tex. Civ. App.— 230 S. W. 723. 

The fact that the umpire did not participate in the delibera- 
tions until after disagreement between the appraisers arose 
does not affect the validity of the award, in the absence of 
a requirement in the policy or in the arbitration agreement 
requiring his continuous participation from the beginning. 
Home Insurance Co. v. Walter (1921 — Tex. Civ. App. — 230 
S. W. 723. 

§42b. Sufficiency of Award. — Under an open policy the 
insurer had the right either to pay to the insured the actual 
amount of the loss or to repair the automobile and put it 
in the same condition it was in before the fire. The parties 
being unable to agree upon the loss an agreement for ap- 
praisement was entered into, to determine "the sound value 
and damage upon the property." The appraisers made an 
award determining "the sound value to be : value of the car 
at present time, $25; value of the car before the fire, $300; 
and the damage to be, cost of repairs to car, including new 
parts for body and new body, wind-shield and top, $1,284.30." 
It was held in an action on the policy, that the words "sound 
value and damage," as used in the submission, were synomy- 
ous with the words "the amount of loss" which, under the 



38 AUTOMOBILE INSURANCE LAW 

policy, was the question to be determined by the submission. 
When the value of the machine immediately before the fire 
was fixed, the difference between these two sums represented 
the loss which the insured had sustained. The award fur- 
nished sufficient data to enable the insurer to exercise its 
option to repair. It was unambiguous, was in strict accord- 
ance with the agreement of submission and was binding upon 
the parties. Eberhardt v. Federal Insurance Co. (1913) 14 
Ga. App. 340, 80S. E. 856. 



CHAPTER VII 

Extent of Loss and Option to Repair 

§ 43. Expert Testimony as to Extent of Loss. 

§44. Cost of Repairs. 

§ 45. Effect of Offer to Repair. 

§ 46. Time Within Which Offer is Available to Company. 

§ 47. Company's Liability for Delay in Repairs. 

§ 48. Evidence as to Repairability. 

§43. Expert Testimony as to Extent of Loss. — Whether 
or not an insured automobile damaged in a collision with 
another automobile was or was not a total loss is a proper 
subject for expert testimony. Wolff v. Hartford Fire Ins. 
Co. (1920)— Mo. App.— 233 S. W. 810. Where the testimony 
in an action on a collision policy showed that the insured 
automobile was very much damaged by the collision the in- 
sured was held entitled to a judgment for at least nominal 
damages although the evidence of his witness as to cost of 
repairs was excluded because of his failure to qualify as an 
expert. Wilson Bryant Co. v. Agricultural Ins. Co. of Water- 
town, (1918) 171 N. Y. Supp. 218. 

§44. Cost of Repairs. — Under a policy providing: "The 
Corporation shall not in any event be liable under this pro- 
vision for more than * * *the actual cost of the suitable 
repair of the property injured/' it was held that this lan- 
guage indicated that the contemplation of the parties was 
that the measure of damages should be the actual cost of 
repair, and that the trial court properly permitted damages 
to be shown by proving the cost of the repairs and that 
they were reasonably worth the amount of the charge. 
Items in such charges should be specifically objected to at 

39 



40 AUTOMOBILE INSURANCE LAW 

the trial to permit of the objections being considered on ap- 
peal. Lepman v. Employers' Liability Assurance Co. (1912) 
170 111. App. 379. 

An indemnity insurance policy insured against loss by 
reason of liability imposed by law for the destruction of or 
injury to the property of others arising from the insured's 
ownership, maintenance or use of certain automobiles. A 
clause of the policy provided that 'The company's liability 
* * * is limited to the actual damage or destruction, which 
shall not be greater than the actual cost of the repair or 
replacement thereof." One of the insured's automobiles 
collided with another car and damaged it, under circum- 
stances rendering the insured liable. The insurance com- 
pany paid the owner of the injured car the amount of the 
bill for repairs paid by him. Thereafter the owner of the 
injured car recovered a judgment against the insured for 
the depreciation in the value of his car caused by the acci- 
dent over and above the amount paid for repairs. The in- 
sured paid this judgment and sued the insurance company to 
recover the amount so paid, with attorney's fees. The court 
below gave judgment for the insurance company, but on 
appeal a majority of the Minnesota Supreme Court held 
that the limitation clause above quoted does not limit the 
liability of the insurance company to the actual cost of re- 
pairs made, when it appears that they do not and cannot 
make the car as good as it was before the accident, and that 
the insured may recover the amount of the judgment paid 
by him for depreciation in the value of the car, with at- 
torney's fees incurred in defending the suit. 

The writer of the opinion, Mr. Justice Bunn, with whom 
concurred Mr. Chief Justice Brown, took a contrary view, 
saying: "But for the limitation clause there would be no 
doubt of the liability of the insurer. Was it intended by 
the limitation clause to preclude liability when the insured 
was compelled to pay for injuries that could not be remedied 
by mechanical repairs? Is this clause so free from am- 



EXTENT OF LOSS AND OPTION TO REPAIR 41 

biguity that it is necessary to so construe it? To repair an 
automobile means to restore it to a sound or good state after 
injury or partial destruction, to restore it to its original 
condition. 'Replacement' has much the same meaning, but 
as used would seem to refer to cases, where property is de- 
stroyed rather than merely damaged, where repairs only will 
not restore it to its original condition. But there are many 
articles of property which are never again of the same value 
after injury and repair. It would be often impossible to 
restore a damaged article to its original condition by re- 
pairing it. It was not possible to make Brown's car as good 
as it was before it was damaged. But all was done that 
was possible to this end, without buying him a new car. 
The members of the court are divided in their opinions as 
to whether the decision of the trial court is sound. The 
writer thinks that under the clause providing that the lia- 
bility of the insurer is limited to the actual value of the 
property damaged or destroyed, 'which shall not be greater 
than the actual cost of repair or replacement thereof/ de- 
fendant is not liable beyond the amount actually paid by 
Brown for repairs to his car. A majority of the court thinks 
that this is too narrow a construction of the language of 
the limitation clause, that, where there are damages to the 
property that are not and cannot be fully remedied by re- 
pairing it, there is a liabilhy for the full loss, limited, of 
course, by the money limit specified. We have found no 
authorities that are helpful, and were cited to none. The 
view of a majority of the court leads to a reversal." Christi- 
son v. St. Paul Fire & Marine Insurance Co. (1917) 138 Minn. 
51. 

§ 45. Effect of Offer to Repair. — By the exercise of the 
option to repair the automobile, in which the insured is 
bound to acquiesce, the original contract of the parties is 
converted into a new one on the part of the insurer to repair 
the car and restore it to its former condition. The contract 
to pay the loss is thus superseded by the contract to repair. 



42 AUTOMOBILE INSURANCE LAW 

The insured no longer has a right of action upon the former ; 
his sole remedy is upon the new contract. Letendre v. Auto- 
mobile Insurance Co. of Hartford, Conn. (1921) — R. I. — 
112 Atl. 782. 

In a recent Canadian case it is held that an insured against 
collision cannot succeed in an action on the policy where his 
car has been damaged by collision where the insurance com- 
pany makes an offer to repair the damages in accordance 
with the terms of the policy, giving the company the right 
to replace or repair the damaged property or pay for it in 
money. Subsequent to the accident in respect of which 
damages were claimed the car was examined by an agent 
of the company, who was of the opinion that the car could 
be satisfactorily repaired in Montreal, and, on behalf of the 
company, elected to repair the car there. The insured refused 
to deliver the car for this purpose on the ground that he 
feared they would not repair it fully and completely, but 
expressed willingness to have it sent to the factory of the 
makers at Detroit. The trial judge held that the position 
taken by the company was the sound one, and that, the com- 
pany having exercised its option, the insured was bound to 
deliver the car, if he desired to avail himself of his rights 
under the contract, and if, upon the return of the car, he 
was advised that the contract had not been complied with, 
he would then have his legal remedy. Also, that the elec- 
tion to repair having been made, a tender to pay in cash, 
made subsequently, was made without prejudice. Judgment 
for the company was affirmed by a divided court. Those for 
dismissing the appeal held that the insured came to his con- 
clusion too soon that the company would not repair the car 
satisfactorily, and that he was not justified in refusing to 
allow the company to have the car. Sare v. United States 
Fidelity & Guaranty Co. (1919) U. S. Sup. Ct., 50 Dominion 
Law Rep. 573. 

An automobile truck insured on a valued policy for $2,500 
having been badly damaged by fire, the insurance company 



EXTENT OF LOSS AND OPTION TO REPAIR 43 

offered to settle the claim for $2,000 or repair the car. The 
insured accepted the latter offer, provided the repairs were 
not delayed too long, and the car was taken by the insurance 
company to have the repairs made. The company did not 
give the insured any assurance as to the length of time 
necessary to make the repairs. It merely made an estimate 
of the time at about four weeks. The insured never made 
complaint that the work was unreasonably delayed or that 
the car when repaired was not as good as it was before the 
fire. Two months after the repair work was commenced 
the insurance company tendered the car for delivery, free of 
expense. The insured did not acknowledge the company's 
letter, but remained silent for upwards of five months, when 
they commenced action to recover $2,500 under the policy 
for a total loss of the car. The New York Court of Ap- 
peals held the complaint was properly dismissed. The 
election of the insured to have the car repaired and the in- 
surance company's undertaking to make the repairs within 
a reasonable time created a contractual relation between 
the parties which terminated all rights of both parties under 
the policy contract. Such substituted contract deprived the 
insurance company of asserting any right or option it had 
under the policy and deprived the insured under the circum- 
stances of the case of any right to assert a claim under the 
policy. The only remedy, if any, either party thereafter 
had was for breach of the new or substituted contract. 
Gaffey v.* St. Paul Fire & Marine Insurance Co. (1917) 221 
N. Y. 113. 

§ 46. Time Within Which Offer is Available to Company. 

— Under a policy giving the insurance company the option 
to repair, rebuild or replace the property lost, providing 
that the company gives notice of its desire to exercise this 
option within thirty days after the receipt of the sworn 
statement of loss, the company cannot, after the expiration 
of the thirty days, insist upon the right to rebuild or replace 



44 AUTOMOBILE INSURANCE LAW 

the car. Gross v. Germania Fire Insurance Co. (1920) 29 
Pa. Superior Ct. 879. 

§ 47. Company's Liability for Delay in Repairs.— A com- 
pany which exercises its option to repair is liable for un- 
reasonable delay in making the repairs, and for depreciation 
through improper care during repairs. If the insurance com- 
pany, instead of paying the damage caused by fire under the 
policy, elects, under the; terms of the policy, to repair the 
automobile and return it in as good condition as it was in 
just prior to the fire, testimony is admissible to show the 
loss of profits sustained by reason of the repairs to the 
automobile not being made within a reasonable length of 
time, and its depreciation in value caused by improper hous- 
ing. Letendre v. Automobile Insurance Co. of Hartford, 
Conn. (1921)— R. L— 112 Atl. 782, citing Winston v. Arlington 
Fire Insurance Co. (1908) 32 App. D. C. 61, 20 L. A. R. 
(N. S.) 960 16 Ann. Cas. 104. 

§ 48. Evidence as to Repairability. — One who has been 
in the automobile salvage business for two years prior to the 
trial and has had twelve years of experience in the auto- 
mobile business ; who purchased the car in question from the 
plaintiff insured prior to the trial and junked it for the pur- 
pose of selling such parts thereof as had any value; and 
who testified that he had carefully examined it when he 
received it to determine its condition, enumerating the parts 
destroyed or injured, was held sufficiently qualified to testify 
as an expert on the question of whether or not 'the auto- 
mobile in question could be repaired so as to operate proper- 
ly as an automobile. A witness whose testimony disclosed 
that he had been engaged in the automobile business for 
seven years was held sufficiently qualified to testify on the 
same question. Where two expert witnesses testified that 
the automobile insured and damaged in a collision could not 
be repaired so as to operate properly, but admitted, on cross- 
examination, that each and every injured or destroyed part 
of the automobile (which parts in fact aggregated but a 



EXTENT OF LOSS AND OPTION TO REPAIR 45 

small portion of the whole of the automobile) could have 
been repaired or replaced, it was held that this evidence did 
not warrant the submission of the case to the jury upon the 
theory that the automobile was totally destroyed. Wolff v. 
Hartford Fire Ins. Co. (1920)— Mo. App.— 223 S. W. 810. A 
mechanic was held not to have sufficient knowledge of the 
cost of repairs to an automobile of the particular make 
owned by the plaintiff to be able to testify as an expert. 
Callahan v. London & Lancashire Fire Insurance Co. (1917) 
98 Misc. (N. Y.) 589, 163 N. Y. Supp. 322. 



CHAPTER VIII. 

Representations and Warranties 

§49. In General. 

§50. Representation made Warranty. 

§51. Materiality of Representations. 

§52. Misrepresentations — Intent to Deceive. 

. §53. Misrepresentations as to Cost of Automobile. 

§54. Misrepresentations as to Price May be Question for Jury. 

§55. Knowledge by Company's Agent of Cost. 

§56. Misrepresentations as to Year Model. 

§57. Same — Good Faith of Insured Immaterial. 

§58. Same — Inspection by Company's Agent. 

§59. Same — May be Question for Jury. 

§60. Identification of Automobile. 

§61. Renting and Hiring Warranties. 

§62. Same: — Warranties Apply Both to Mortgagor and Mortgagee. 

§63, Same — Occasional Use for Hire Hejd No Breach. 

§64. Same — Effect of Statute Abolishing Warranties. 

§65. Same — Violation for Jury — Burden of Proof. 

§66. Location of Automobile — "Private Garage." 

§67. Waiver of Location Warranty. 

§68. Misrepresentations as to Other Insurance. 

§69. Other Insurance Does Not Necessarily Forfeit Policy. 

§70. Misrepresentations as to Ownership. 

§71. Change of Ownership. 

§72. Waiver of Conditions as to Ownership. 

§72a. Incumbrances. 

§ 49. In General. — The word "misrepresentations, " as used 
in automobile and other insurance policies, is taken in the 
same sense as it is ordinarily used by the laity, and it is 
therefore not a technical term. Webster defines misrepre- 
sentation as, "Untrue representation, false or incorrect state- 
ments or account ;" and misrepresent as "To represent in- 
correctly * * * to give a false or erroneous representation of, 
either maliciously, ignorantly or carelessly." Misrepresen- 
tation, as used in insurance law, means "a false statement 
touching matters material to the risk," and it is immaterial 
whether the misstatement resulted from bad faith or from 

46 



REPRESENTATIONS AND WARRANTIES 47 

accident or ignorance. The burden of proving false rep- 
resentations pleaded by the company, as well as their 
materiality, is held to be upon the company. Zackwik v. 
Hanover Fire Ins. Co. (1920)— Mo. App.— 225 S. W. 135, 
citing Smith v. American Automobile Ins. Co., 188 Mis. App. 
279, 304, 175 S. W. 113, 115; British & Foreign Marine In- 
surance Co. v. Cummings (1910) 113 Mod. 350, 76 Atl. 571. 

§ 50. Representation Made Warranty. — Ordinarily a mis- 
representation of the assured will not affect the validity of a 
policy unless it is material to the risk, or, by the terms of 
the application and policy, has become an affirmative war- 
ranty. When the parties by the terms of their contract 
expressly stipulate that a representation', shall be regarded 
as material, it ceases to be a representation only, and be- 
comes a warranty. "When a policy is issued on the faith of 
representations of the assured as to existing facts, such 
representations become warranties, with the result that, if 
they be not strictly true as made, the policy, without regard 
to their materiality, will not take effect. The parties being 
agreed upon the materiality of the statements warranted, 
are thereafter precluded from questioning their materiality." 

In an application for an automobile fire policy the descrip- 
tion was "hereby made a warranty by the applicant" and the 
policy made the statements in the application a warranty and 
part of the policy. A stipulation was also contained in the 
policy that it should be void for concealment or misrepre- 
sentation of material facts. Statements in the application 
that the car was new and had cost $4,300 were shown, in an 
action on the policy, to be untrue. It was /held the state- 
ments were warranties and not representations, and no re- 
covery could be had on the policy. Miller v. ; Commercial 
Union Assurance Co. (1912) 69 Wash. 529, 125 Pac. 782. 

§ 51. Materiality of Representations. — Whenever the mis- 
representation would have, or might have, a real influence 
upon the underwriter either not to underwrite at all, or not 



48 AUTOMOBILE INSURANCE LAW 

to Underwrite except at a higher premium, it must be deemed 
material to the risk. Smith v. American Automobile Insur- 
ance Co. (1915) 188 Mo. App. 297, 175 S. W. 115. The question 
of materiality is usually for the jury to determine; "except 
in such clear cases as can be determined by the court as a 
matter of law." Smith v. Automobile Insurance Co. (1915) 
188 Mo. App. 297, 175 S. W. 115; Locke v. Royal Insurance 
Co. (1915) 220 Mass. 202, 107 N. E. 911 ; Orient Insurance Co. 
v. Van Zandt-Bruce Drug Co. (1915) 50 Okla. 558, 151 Pac. 
323; Traynor v. Automobile Mutual Insurance Co. (1921) — 
Neb.— 181 N. W. 566. 

In an action on an automobile fire policy the North Carolina 
Supreme Court holds that every fact stated in the application 
for such a policy will be deemed material which would materi- 
ally influence the judgment of an insurance c om P an y either 
in accepting the risk or in fixing the rate of premium. To 
defeat recovery, it is not necessary that a material misrepre- 
sentation by the applicant must be shown to have contributed 
in some way to the loss for which indemnity is claimed. 
Lummus v. Fireman's Fund Insurance Co. (1914) 167 N. 
Car. 654, 83 S. E. 688. 

Section 2565 of the California Code provides that "Materi- 
ality is to be determined not by the event, but solely by the 
probable and reasonable influence of the facts upon the party 
to whom the communication is due, in forming his estimate 
of the disadvantage of the proposed contract, or in making 
his inquiries." Solomon v. Federal Insurance Co. (1917) 176 
Cal. 133, 167 Pac. 859. 

§ 52. Misrepresentations — Intent to Deceive, — In an action 
on an automobile fire policy, the insurance company, as a 
defense, relied upon the fact that the owner, at the time the 
insurance was obtained, represented that the automobile, a 
Winton car, was manufactured in the year 1911, and that when 
purchased by the insured in October, 1911, it was new and 
had cost the insured $3,400, whereas, in fact, the automobile 
was a 1910 model, and when purchased by the insured was 



REPRESENTATIONS AND WARRANTIES 49 

a secondhand car, and had cost her $2,000, $800 paid in cash 
and $1,200 in trade; that had the insurance company known 
the car was a 1910 model, or a secondhand car, or that it had 
cost the insured only $2,000, the policy, which was for $1,000, 
would not have been issued. The contract of purchase be- 
tween the insured and the Winton company described the car 
as a 1910 model. The premium on secondhand cars is higher 
than on new cars, and the Washington insurance law requires 
schedules of rates to be filed with the insurance commission, 
deviation from which renders the insurance company guilty 
of a misdemeanor. The insured's husband knew that the 
car was secondhand, and admitted that he represented it as a 
new car, but denied that he knew it was a 1910 model, or he 
had forgotten the actual date of manufacture. The insured 
relied upon the Washington statute, section 6059-34 Rem. 
Code, providing that misrepresentations or warranties shall 
not be deemed material or defeat the policy, unless made with 
the intent to deceive ; and argued that although these repre- 
sentations were made with knowledge of their falsity, it was 
a question for the jury to determine as to whether they were 
made with intent to deceive. 

It was held that the rule that intent accompanying false 
and fraudulent statements should be submitted to the jury 
"should not be so far extended as to include a case such as 
this, and allow insurance to be enforced which was not pro- 
curable had the truth been told, where it was issued relying 
upon fraudulent statements, and the proof of honest intent 
consists merely in the applicant's bare affirmation that his in- 
tent was honest. The proof of the making of false and fraudu- 
lent representations raises a presumption of dishonest motive 
which must be overcome by evidence establishing an honest 
motive. It is true that imotive and intent are mental states, 
and that evidence of the mental state of an applicant is some- 
times hard to prove where there are no other facts or cir- 
cumstances to establish it other than the applicant's own 
declaration. However, honesty and fair dealing would seem 



50 AUTOMOBILE INSURANCE LAW 

to require that, in order to overcome the presumption, there 
must be some testimony more concrete than was here given 
when an applicant admits, as he does here, that the represen- 
tations were made with the knowledge that they were un- 
true. It may be that representations made at a time when 
the applicant may have forgotten the facts, or made through 
carelessness or mistake, or where the representative of the 
insurance company had prior knowledge of the facts which 
were contrary to the representations made by the applicant, 
make submissible to the jury the question of whether the 
applicant acted with intent to deceive or not. In this case the 
respondent (the owner) admits that the statements were 
'material enough to avoid the policy if there was an intent 
to deceive/ and, they having been made with knowledge of 
their falsity, a presumption arises of the intent to deceive, 
which presumption is not overcome by the unsupported declar- 
ation of the applicant that no such intent existed in his mind 
at the time." It was therefore held that the insurance com- 
pany's motion for judgment notwithstanding verdict for the 
plaintiff should have been granted. Day v. St. Paul Fire & 
Marine Ins. Co. (1920)— Wash.— 189 Pac. 95. 

§ 53. Misrepresentations as to Cost of Automiobile. — The 

California Supreme Court says in Solomon v. Federal Ins. Co. : 
'The purchase price of a second-hand automobile is particu- 
larly important in a valued policy, as it must be manifest that 
an insurance company will not agree to pay, say, $3,000 for 
the loss of an automobile which cost the insured but $2,500. 
This is not^a case of overestimating the value of the thing 
insured, which in an open policy is not necessarily fatal ; here 
we have the statement of a fact, the price the insured paid for 
the car. No question of mistaken opinion is involved. Where 
a valued policy is issued upon the basis of the application 
alone, as in this case, it is difficult to see what could be more 
important to the insurer in determining the amount of the 
policy than positive statements of the year in which the car 



REPRESENTATIONS AND WARRANTIES 51 

was built and the price paid for it by the insured." Solomon 
v. Federal Insurance Co. (1917) 176 Cal. 133, 167 Pac. 859. 

In an action on an open policy, the Texas Court of Civil 
Appeals said: "Generally stated, a fact would be material to 
the insurance risk which would induce the insurance company 
to decline the insurance altogether, or not to accept it at a 
higher premium." Where a car insured against fire was rep- 
resented to have been run a few months less than it had been 
and to have been purchased for a sum stated, instead of trad- 
ed, and it appeared that the matters stated did not have an 
effect upon, and could not have changed, the rate of premium 
charged if correctly given, it was held they were not material 
to the risk. St. Paul Fire & Marine Ins. Co. v. Huff (1915)— 
Tex. Civ. App. — 172 S. W. 755. A defense to an action on an 
automobile fire policy alleged fraud in that the application 
had represented that the car, a Velie, was obtained by ex- 
changing a Ford and money therefor, whereas in fact the 
Ford car, with cashy was first exchanged for a Crow Elkhart 
automobile, and the latter, with boot money, traded for the car 
insured. The court said that possibly the son of the insured, 
who did the trading, found it necessary, in order to substi- 
tute the Velie automobile for the Ford car, to first exchange 
the Crow Elkhart car, and then for that in question. The 
answer may have been made on that theory. Whether so or 
not, the record was found to contain nothing tending to show 
a dishonest motive, or that the insurer was misled by the in- 
accuracy of the answer. The charge of fraud was therefore 
denied. White v. Home Mut. Ins.. Ass'n of Iowa (1920) — 
Iowa— 179 N. W. 315. 

§54. Misrepresentation as to Price May be Question for 

Jury. — It may be a question of fact for the jury, under the 
evidence, whether or not any misrepresentation was made 
about the car being paid for in cash and also as to whether 
such a misrepresentation, if made, was material to the risk. 
And where the insurance company contended that, if its solici- 
tor had known that the insured had not paid as much as 50 



52 AUTOMOBILE INSURANCE LAW 

per cent, of the value for the car, at least 33 1/3 per cent., the 
company would not have issued the policy, but the testimony 
of the company's witnesses left it in doubt whether the policy 
would have been issued under the circumstances of the case, 
where the automobile dealer who sold the car to the insured 
had taken notes in full payment of the machine, it was held 
that to have submitted a special issue requested by the com- 
pany as to whether the car was fully paid for and to have had 
it answered in the affirmative would not have made it an 
ultimate basis for a judgment for the defendant, for the reason 
that either the court or jury must have followed this finding 
with the further finding that such a misrepresentation was 
material to the risk in that it would probably not have issued 
the policy had it possessed the knowledge and the latter issue 
was not submitted. California Ins. Co. v. Eads (Tex. Civ. 
App. 1919) 209 S. W. 216. 

§55. Knowledge by Company's Agent of Cost. — If an agent 
of the insurance company was informed of the true cost of the 
car, and, notwithstanding this knowledge, procured a policy to 
be issued by the insurance company, without any representa- 
tion as to its cost on the part of the owner, it is held that 
the erroneous statement of the actual cost of the car to be 
$2,000 on the schedule of statements endorsed on the policy is 
to be regarded as that of the company with full information, 
and it is estopped to assert the contrary. A policy insured 
an automobile against loss by fire in the amount of $1,750. 
On its total destruction by fire the insurance company de- 
clined to pay the loss, because, it said, the insured made a 
false and fraudulent representation material to the risk with 
respect to the cost of the automobile which induced the is- 
suance of the policy in the first instance, and also because the 
policy stipulated a warranty in respect of the matter of the 
actual cost. No written application was executed by the in- 
sured prior to the issuance of the policy, but a schedule of 
statements endorsed thereon contained the following: "Ac- 
tual cost to assured, including equipment — $2,000." It ap- 



REPRESENTATIONS AND WARRANTIES 53 

peared, in an action on the policy, where these two defenses 
were made, that the plaintiff purchased the automobile short- 
ly before it was insured at the price of $1,000. It was a 
second-hand touring car and it sold originally, when new, 
for some $3,500 or $4,000. After its purchase the plaintiff 
added to it other equipment at an outlay of $427.46, so that 
when the insurance was effected the automobile had actually 
cost her $1,427.46. The plaintiff, however, asserted that she 
made no representation to the insurance company or to the 
broker who negotiated the insurance, who was a friend of the 
person who sold her the automobile. The question arose 
whether this broker was agent for the plaintiff or the insur- 
ance company in respect of the representations. It was held 
that, the company being accustomed to deal with the broker 
and pursuing an established custom of trusting to representa- 
tions made by him, having made him its agent for the pur- 
pose of delivering the policy, collecting the premium, com- 
pensating him for the service by an allowance of commission, 
and having established and pursued a custom in accepting the 
representations of the broker as to such material matters con- 
cerning the property insured, the broker was to be regarded 
as the agent of the insurance company thereabout, in cases 
where it is entirely clear that he is in no manner the agent 
of the insured. Farber v. American Automobile Insurance 
Co. (1915) 191 Mo. App. 307, 177 S. W. 675. In a later case 
it is said that it is by no means clear, though the point has 
not been expressly decided, that the insured, after retaining 
the policy for a year, can then insist that a misdescription 
of the car insured, sufficient to constitute a breach of war- 
ranty, was the act of the insurance company and entirely 
unknown to the insured. Solomon v. Federal Insurance Co. 
(1917) 176 Cal. 133, 137, 167 Pac. 859. 

§ 56. Representations as to Year Model. — Representations 
as to the year model of the automobile are, as a rule, held to 
be material. An automobile fire policy contained a warranty 
that the car was a model of 1910. The car was burned about 



54 AUTOMOBILE INSURANCE LAW 

a month after it was insured. In an action on the policy it 
was agreed that the machine was a model of 1907. The de- 
fense was that this misrepresentation and warranty rendered 
the policy void, being material to the risk and therefore not 
affected by Missouri Revised Statutes 1909, section 7024, 
which avoids the effect of all other warranties. The rate 
sheet issued by the insurance company to its agents, and by 
which they were governed in writing automobile insurance, 
prohibited the writing of fire insurance upon "any car prior 
to 1908 model." It allowed liability insurance to be written 
on cars more than four years old but not fire insurance. And 
the testimony was that no fire insurance was permitted or 
written on cars over that age. The rate sheets also showed 
that there was a continuous decrease in the amount of insur- 
ance allowed on a car the older it got during the years a car 
was insurable. It was held that the misrepresentation was 
material as a matter of law. If the car was represented to 
the company to be only two, when it was five years old, and 
the company had no means nor opportunity of knowing dif- 
ferently, then there was no contract of insurance entered into 
by the compay with reference to the car. The principle in- 
volved was more than the question whether the fire was at- 
tributable to the age of the car. If that were the question, 
then of course it would be for the jury to say whether the 
misrepresentation was material to the risk. But the material- 
ity depends upon whether, had the true facts been known, 
the company would have insured it at all or would have limit- 
ed itself to the premium charged. Smith v. American Auto- 
mobile Insurance Co. (1915) 188 Mo. App. 297, 175 S. W. 115. 

To describe an automobile in a valued policy as being made 
in 1909, when in fact it was imade in 1908, is such a material 
misdescription of the thing insured as to constitute a breach 
of the express warranty provided for in section 2607 of the 
California Civil Code. Solomon v. Federal -Insurance \ Co. 
(1917) 176 Cal. 133, 167 Pac. 859. 



REPRESENTATIONS AND WARRANTIES 55 

An automobile fire policy issued in October 1912 contained 
the following clause: "This entire policy shall be void if the 
insured has concealed or misrepresented, in writing or other- 
wise, any material fact or circumstance concerning this in- 
surance or the subject thereof." The statement made to the 
insurance company's agents, and embodied in the policy, was 
that the automobile was a No. 877 Premier, 40 horse power, 
4 cylinder touring car, built in 1910. In fact it was a 24 horse 
power car, capable of developing 29 horse power, and built 
in 1906. It was held that the misrepresentation that the car 
was a 1910 model was clearly a misrepresentation of a mater- 
ial fact. "It is impossible for insurance agents to ascertain 
the condition of the car from its outside appearance. The 
condition largely depends upon the wearing of the gears, 
which are concealed within metal-bound cases. It also largely 
depends upon the year of manufacture, important changes 
being made from year to year to remedy defects and to add 
to convenience and safety in the use of the cars. It is a mat- 
ter of common knowledge that in 1912 a 1910 Premier was 
of a value greatly in excess of a 1906 Premier of the same 
model." Reed v. St. Paul Fire & Marine Ins. Co. (1915) 165 
N. Y. App. Div. 660, 151 N. Y. Supp. 274. 

A used car, constructed in 1906, and insured in November, 
1909, is not of the same insurance value as a car constructed 
in 1907, and the statement of the applicant that the car was 
of the 1907 model was held a material representation, upon 
which the insurance company had a right to rely, in issuing 
a valued fire policy in the sum of $2,000. Harris v. St. Paul 
Fire & Marine Ins. Co. (1920) 126 N. Y. Supp. 118. 

It is held that a car was new within the meaning of an ap- 
plication for insurance When it was bought by the employer 
of the plaintiff insured in January 1915 for the plaintiff and 
kept in the employer's garage, the title remaining in the em- 
ployer till about March 1, when the plaintiff was able to pay 
for the machine, and which was then insured. Rabinowitz 
v. Vulcan Insurance Co. (1917) 90 N. J. L. 332, 100 Atl. 175. 



56 AUTOMOBILE INSURANCE LAW 

§ 57. Same — Good Faith of Insured Immaterial. — The 

fact that material misrepresentation as to the age of the car 
insured was innocently made does not change or affect the 
matter. When the insurer makes inquiry about facts material 
to the risk, he is justified in acting upon the presumption 
that the information imparted by the applicant is correct. The 
representations of the applicant become the basis of insur- 
ance, and if they be false, touching matters material to the 
risk, the contract obtained through their influence cannot be 
enforced ; and it is, in such case, quite immaterial whether the 
misstatement resulted from bad faith or from accident or 
ignorance. Smith v. American Automobile Insurance ,Co. 
(1915) 188 Mo. App. 297, 175 S. W. 115. 

§ 58. Same — Inspection by Company's Agent. — An inspec- 
tion of the car by the insurance company's agent will not 
avoid the effect of a material representation as to the model 
of the car where there are no means of telling by such inspec- 
tion what model it was. Smith v. American Automobile In- 
surance Co. (1915) 188 Mo. App. 297, 175 S. W. 115. This is not 
inconsistent with the decision in British & Foreign Marine 
Insurance Co. v. Cummings, one of the earlier automobile 
insurance cases, where it appeared that application for a fire 
policy stated that the automobile was built in 1907 by the 
Pope-Toledo Company. The machine was examined by the 
company's agent, who approved the application and a policy 
was issued. The car was destroyed by fire. The company 
denied liability because the machine was built in 1906, and 
on cars built in that year the premium was higher, and the 
amount of insurance allowed was less than on those built in 
1907. In making the representation as to the year the in- 
sured acted in good faith, on information given him by the 
vendor. An inspection of the car would not disclose the year 
of manufacture, but its number, in connection with the manu- 
facturer's rules and catalogues, would have shown that it was 
made in 1906. It was held that the representation as to the 
year was not a warranty, but related to a fact which was not 



REPRESENTATIONS AND WARRANTIES 57 

especially within his knowledge; that this fact could and 
ought to have been ascertained by the company's agent on his 
examination, and that the representation was therefore no bar 
to recovery on the policy. British & Foreign Marine Ins. 
Co. v. Cummings (1910) 113 Md. 350, 76 Atl. 571. 

In a later case it appeared that while the application er- 
roneously stated 1913 as the year when the car, a Stearns, 
was built, it correctly stated the model as 30-60, and thus the 
application put in possession of the company the means of 
learning that no Stearns automobiles of the model 30-60 were 
built after the year 1910, or early in 1911. With this informa- 
tion furnished in the application, it was held that it could 
not be said as a matter of law that the company was de- 
ceived by the misstatement of the year in which the car was 
built. Traynor v. Automobile Mutual Insurance Co. (1921) 
—Neb.—, 181 N. W. 566. 

In an action on a policy where the defense was false rep- 
resentations as to age and model, the company was not es- 
topped from making such defense by the failure of its local 
agent to leave his office to look at the car when the owner 
called his attention to the fact that the number of the engine 
as given in the policy was wrong, and nothing was then 
known to create suspicion that the information as to the age 
of the car was false ; nor was the company estopped from 
relying on the misrepresentations by the fact that in a subse- 
quent conversation with the insurer's agent the insured did 
not do anything further to mislead the company. The orig- 
inal act of misrepresentation was a positive one and of such 
a nature as to invalidate the policy. Day v. St. Paul Fire & 
Marine Ins. Co. (1920)— Wash.— 189 Pac. 95. 

§ 59. Sam©— May Be Question for Jury. — The question 
whether misstatements as to the year model are material may 
be, under the evidence, for the jury. Two actions, tried to- 
gether, were based on three fire insurance policies over cars 
destroyed by fire. One, issued by the Royal Insurance Com- 
pany, was in the non- valued form of $1,500 on a Fiat automo- 



58 AUTOMOBILE INSURANCE LAW 

bile. The others were valued policies issued by the Columbia 
Insurance Company, one for $1,800 on a Hotchkiss automobile, 
the other for $650 on another Hotchkiss car. The cars were 
admittedly worth more than the amounts for which they 
were insured. The substantial defense was misdescription 
of the cars in the application and policies, with reference to the 
year model. In all other respects, such as factory number, 
type of body, the number of cylinders, horse power, etc., the 
descriptions were conceded to be correct. The defendants 
contended that while the cars were described as of a 1908 
model, the Fiat car was of a 1907 model and the two Hotch- 
kiss cars of the 1906 model. It appeared that 1908 was speci- 
fied, not as the "year of manufacture," but as the "year 
model." They were all foreign cars. There was evidence 
that foreign makers do not make distinct yearly models, as 
American manufacturers do, and that at that time European 
cars used to be designated as 1905-1906, 1906-1907, etc., and 
not by single years. There was also testimony that the dif- 
ference between a Hotchkiss 1906 and a 1908 car would be 
hardly discernible, and that a Fiat car of 1907 and one of 1908 
were substantially identical. So far as the cases involved 
the identification of the automobile insured, the jury could 
find that the minds of the parties were in accord. There was 
also evidence that no greater premium would be charged for 
a Fiat 1907 than for a Fiat 1908, and that therefore the mis- 
statement, if made, did not increase the risk of loss and was 
immaterial. The Hotchkiss cars were insured as "Dealers' 
Automobiles," and admittedly the rate was properly deter- 
mined by adding one per cent to the basis rate for new cars, 
and did not depend upon their age. It was held that the 
question as to whether the misstatements as to year model 
were material was for the jury, which found for the plaintiff. 
Locke v. Royal Insurance Co., Ltd. (1915) 220 Mass. 202, 107 
N. E. 911. 

In a later case it was held that the age of an automobile 
upon which insurance is sought is material only in so far 



REPRESENTATIONS AND WARRANTIES 59 

as it affects its value and thereby the moral hazard to be as- 
sumed by the company ; and where an applicant for insurance 
upon a second-hand rebuilt automobile in his application in- 
correctly states the year in which the car was originally built, 
but also in his application states other facts from which the 
insurance company, by ordinary diligence, could have ascer- 
tained the correct year, it cannot be said as a matter of law 
that the insurance company was "deceived * * * to its in- 
jury" within the meaning of section 3187, Nebraska Rev. St. 
1913, which provides that no misrepresentation or warranty 
is to be deemed material or sufficient to avoid the policy un- 
less it "deceived the company to its injury." Traynor v. Auto- 
mobile Mutual Insurance Co. (1921)— Neb.— , 181 N. Y. 566. 
The automobile in this case was a Stearns built in 1910, 
stated by the applicant to have been built in 1913. The model 
was correctly stated as Model 30-60. The evidence showed 
that the Stearns company turned out no Model 30-60 cars 
after July 1, 1911. The car itself bore no evidence of when 
it was built. The car had been practically destroyed by fire 
and partially rebuilt in 1913 and in 1914 was completely re- 
built and changed from a four-passenger touring car to a two- 
passenger roadster. The court said: "The only materiality 
of the year when the car was originally built was as it affect- 
ed its value and thereby the moral hazard of the risk as- 
sumed by the company. As the automobile in this case had 
been partially rebuilt in 1913 and completely rebuilt in 1914, 
the year when it was originally built was not much of an 
index to its real value. Originally it was a four-passenger 
touring car and it was almost entirely changed. It might 
well have been that after having been rebuilt in 1914 it was 
more valuable than a new car built in 1913. Hence we do not 
consider that the erroneous statement in the application that 
the car was built in 1913 was under the circumstances very 
material, and certainly it was not sufficiently material under 
our statute to warrant the court in holding as a matter of 
law that it deceived the insurer to its injury. For this rea- 



60 AUTOMOBILE INSURANCE LAW 

son, we believe that the order directing a verdict for defend- 
ant was erroneous." 

§ 60. Identification of Automobile. — In an action on a fire 
policy, where the automobile burned was identified as that de- 
scribed in the policy, as the only automobile owned by the in- 
sured, and as the one intended to be covered by the policy, it 
was held to be no defense that the license number was in- 
correctly stated in the application. And where the descrip- 
tion of a burned car by number was ambiguous, it being shown 
to have a serial number given it at the factory and that of the 
license plate, and no indication being made as to which was in- 
tended in the application or policy, extrinsic evidence was 
held rightly resorted to, to show what was intended. White 
v. Home Mut. Ins. Assn. of Iowa (1920)— Iowa— , 179 N. W. 
315. 

§61. Renting and Hiring Warranties. — The renting and 
hiring warranty in an automobile insurance policy is usually, 
by its terms, a promissory warranty, a breach of which will 
avoid the policy. An automobile fire policy contained as one 
of its terms the following: 

"17. Warranted by the assured hereunder that the auto- 
mobile hereby insured shall not be used for carrying 
passengers for compensation or rented or leased during 
the term of this policy; and in the event of violation of 
this warranty this policy shall immediately become null 
and void." 

Having been inserted in the body of the policy, this war- 
ranty was not dependent upon the negotiations embodied in 
the application and final issuance of the contract of insur- 
ance, which were said by the plaintiff to include a statement 
by him to the insurance company's agent that the car would 
be rented a little for hire in the summer, on which the agent 
assured the plaintiff that that would make no difference to 
the insurance company; and the Massachusetts statute of 
1907, c. 576, § 21, as to intent to deceive and increase risk 
of loss was held to be inapplicable. If the automobile was used 



REPRESENTATIONS AND WARRANTIES 61 

for the transportation of passengers for hire the plaintiff 
stipulated that the policy should be void, and the only remain- 
ing question was, whether upon the evidence it could be ruled 
as matter of law that the warranty had been broken. It was 
agreed by the parties, that with the plaintiff's knowledge and 
consent the plaintiff's son, for compensation which he received 
and retained, made trips during August and September with 
the automobile for the accommodation of tourists and pas- 
sengers ; and this use having been permitted by the plaintiff, 
there was a violation of the warranty at common law, and 
whether the risk had been increased was immaterial. The 
policy was therefore not in force when, in March following, 
the automobile was damaged by fire. Nor was the insured 
entitled to a return of any part of the premium. The policy 
attached and while the premium covered the life of the policy 
if its terms were complied with by the insured, the latter 
could not through his voluntary breach deprive the insurance 
company, which was without fault, of the full benefit of the 
contract. Elder v. Federal Insurance Co. (1913) 213 Mass. 
389, 100 N. E. 655. It is held that it is not necessary that 
there should be a provision in the policy that a breach of a 
promissory warrant as to renting therein j shall avoid '.the 
policy. So, if the insured warrants that he will not use the 
car for carrying passengers for compensation, this warranty 
is a part of the policy and a breach of it avoids the policy, 
even if there is therein no provision to that effect. The fol- 
lowing provision in an automobile fire policy: "It is war- 
ranted by the insured that the automobile hereby insured, 
during the term of this policy, shall not be used for carrying 
passengers for compensation, and that it shall not be rented 
or leased," constitutes a promissory warranty, and a breach 
thereof by the insured prevents recovery. Whether the risk 
was increased is immaterial. Orient Insurance Co. v. Van 
Zant-Bruce Drug Co. (1915) 50 Okla. 558, 151 Pac. 323. 

A different result may be reached where the warranty by 
its terms is not a promissory warranty. Where an indemnity 



62 AUTOMOBILE INSURANCE LAW 

policy over an automobile truck containing a general war- 
ranty that the truck was to be used for "delivery/' provided 
that: "None of the automobiles herein described are rented 
to others or used to carry passengers for a consideration, 
actual or implied, except as follows;" and in the blank space 
following was inserted: "No exceptions/' it was held that 
this provision should be construed as a warranty merely that 
the truck was not rented at the time the policy took effect, 
and did not preclude the insured from maintaining an action 
against the insurance company for damages paid to a per- 
son in settlement for injuries by the truck which, after being 
stored with a garage company, was sent out by the latter in 
charge of a chauffeur hired and paid by the garage company 
to deliver for another company. Mayor Lane & Co. v. Com- 
mercial Casualty Ins. Co. (1915) 169 N. Y. App. Div. 772, 155 
N. Y. Supp. 75. 

Where the renting provision declares that: "In the event 
of violation of this condition this policy shall forthwith cease 
and terminate/' and the car is destroyed by fire after the 
carrying business has ceased, the insurance company will not 
be held liable. A contract provision worded as above cannot 
be suspended during the machine's use for hire and re-in- 
stated when the machine is not so used. The court said: 
"This may be so under some circumstances, but we think the 
language here too positive to bear such construction. If 
the premium of the policy be fixed on the terms of the con- 
tract, why should the insured be permitted to suspend and 
reinstate the contract at will? If plaintiff's contention be al- 
lowed this would be the effect upon the contract." Kress v. 
Insurance Co. of State of Pennsylvania (1915) 18 Luzerne 
(Pa.) Legal Register 278. ! 

A policy was held void for breach of the renting warranty 
in Hamilton v. Fireman's Fund Insurance Co. (1915, Tex. Civ. 
App.) 177 S. W. 173. 

§62. Same— Warranties Apply Both to Mortgagor and 
Mortgagee-— The condition in an automobile fire policy issued 



REPRESENTATIONS AND WARRANTIES 63 

to the mortgagee and mortgagor of the car, as their respec- 
tive interests might appear, that the car should not be used 
for renting purposes or for hire, applies both to the mortgag- 
or and the mortgagee. Where a fire insurance policy over 
an automobile issued to the plaintiff and one who bought the 
car from the plaintiff and gave back a mortgage for part of 
the purchase price provides that the automobile shall not be 
used for renting purposes or for hire, and the evidence shows 
that the car was used mainly, if not entirely, for livery pur- 
poses and uses by such mortgagor, there can be no recovery 
under the policy. Marmon Chicago Co. v. Heath (1917) 205 
111. App. 605. 

§ 63. Same — Occasional Use for Hire Held No Breach.- 

An automobile fire insurance policy contained these clauses : 
"It is warranted by the insured that the automobile hereby 
insured during the term of this policy shall not be used for 
carrying passengers for compensation, and that it shall not 
be rented or leased." "In the event of violation of any war- 
ranty hereunder, this policy shall immediately become null 
and void." It was held that the former of these provisions 
should be construed as prohibiting the owner from using the 
automobile continuously for carrying passengers for hire as 
a business, and that it was not breached by the fact that the 
owner's son had used the car on two or three afternoons 
during a fair without the owner's knowledge for carrying 
passengers for hire to and from the fair-grounds. Commer- 
cial Union Assurance Co. of London v. Hill, (Tex. Civ. App. 
1914) 167 S. W. 1095. 

A clause in a fire policy provided: 'The motor car hereby 
insured will not be rented or used for passenger service of 
any kind for hire, except by special consent of this company 
endorsed hereon in writing." The car was kept by the in- 
sured, a garage keeper, for his own use, and was not rented 
for hire, though it had been used once to take a man to the 
railroad station. The car was taken from the garage by one 
of the insured's employees, and used to carry a party of 



64 AUTOMOBILE INSURANCE LAW 

hunters for hire. On the return journey it was punctured and 
left on the road. After the owner resumed possession of it, 
and was taking it back to the garage, it was burned. The 
proof of loss stated it had been used for the owner's private 
purposes "and some for hire." 

It was held that the parties, by the clause quoted, apparently 
contemplated, not a single act of renting or using the car for 
hire, a mere casual or isolated instance, and that, too, with- 
out the knowledge or consent of the owner, but something 
of a more permanent nature. The carrying of the man to 
the station, if forbidden, was too remote from the time when 
the car was burned. 

The clause was somewhat obscurely worded and therefore 
the court gave it the construction which favored the insured, 
as it involved a question of forfeiture. The words "passeng- 
er service," when considered in connection with the preceding 
words, "rented" or "used," imply more than a single act of 
renting or using, and refer to the business of carrying pas- 
sengers for hire. Being susceptible of this meaning, which, 
under the familiar rule applicable to such cases where the lan- 
guage is not clear and definite, the court was authorized to 
give them, it held the clause did not apply to the case. Crow- 
ell v. Maryland Motor Car Insurance Co. (1915) 169 N. Car. 
35, 85 S. E. 37. 

§ 64. Same — Effect of Statute Abolishing Warranties. — 

A Kansas policy contained a warranty that the insured would 
not let out the automobile for hire without written permission 
from the insurance company. In an action on the policy when 
the car was burned it appeared that on one or two occasions 
this provision was violated ; but at the time the car was burned 
it was not hired. The Kansas statute has abolished warran- 
ties and turned them into mere representations unless the 
matter warranted is material to the risk. It was held that the 
matter warranted v/as not material to the risk and the viola- 



REPRESENTATIONS AND WARRANTIES 65 

tion of the warranty did not violate the policy. Berryman 
v. Motor Car Trust Co. (1908) 199 Mo. App. 503, 204 S. W. 
738. 

§ 65. Same— Violation for Jury — Burden of Proof. — The 

question of violation of the renting provision is usually one 
for the jury. Whether the duty of establishing the defense 
that the renting provision of the policy has been violated rests 
ordinarily upon the defendant apparently has not been decid- 
ed ; but where a statement written by the company's adjuster 
and signed by the insured is given in place of proof of loss 
containing the statement that the policy had been violated 
by the carrying of passengers, and the insured is notified 
before the trial by the affidavit of defense that he had not 
complied with this term of the policy, this necessarily demands 
proof of such compliance. Dunn v. First National Fire In- 
surance Co. (1918) 14 Schuylkill (Pa.) Legal Record 389. In 
an action against an insurance company for the loss of an 
automobile by fire, an averment in the affidavit of defense 
that the insured had carried passengers for hire contrary to 
the terms of the policy is sufficient on that point without 
giving the names of the passengers and the dates on which 
they were carried; the defendant not being required in the 
affidavit of defense to set forth the manner in which the 
facts therein will be proven, or the evidence by which they 
will be substantiated. Shaw v. Liverpool & London & Globe 
Ins. Co. Ltd. (1915) 16 Lackawanna Jurist 288. 

§66. Location of Automobile— "Private Garage."— The 

location of the automobile is essentially material to the 
contract. So, where an automobile insured under a policy 
containing a private garage warranty was, without the com- 
pany's knowledge or consent, removed to another city in 
another state, where it was kept five or six months, and 
then placed in a repair shop where it was burned, the re- 
moval was held permanent and the policy void. Lummus 
v. Fireman's Fund Insurance Co. (1914) 167 N. Car. 654, 83 
S. E. 688. The court said. "Nothing is better settled than 



66 AUTOMOBILE INSURANCE LAW 

that the location of the property insured is essentially ma- 
terial in contracts of insurance and enters largely into the 
consideration of the company in fixing the rate of premium. 
The clause of the policy in this case, containing this war- 
ranty, expressly declares that a reduced rate of premium 
is granted because of the insertion of this provision in the 
contract. The contention of the plaintiff that the policy 
could remain dormant for six months and then be revived 
suddenly because the property was burned up in a repair 
shop is utterly untenable." 

A fire insurance policy described the car insured as "usually 
kept in a private garage on lot. — " It was, in fact, kept in a 
lean-to to the insured's barn, in which it was burned. It was 
argued that this was not a garage. The court said: "The 
word 'garage' was recently appropriated from the French 
language, there meaning keeping under cover, or a place 
for keeping, and, as employed in English, is accurately defined 
by Webster's Dictionary, substantially like that of the Cen- 
tury Dictionary, as 'a place where a motor vehicle is housed 
and cared for.' To be such, the place need not be apart from 
other buildings, though that may be the more common and 
appropriate way. If the 'place' be in a 'lean-to' attached to 
another building, as a barn or corncrib constructed for the 
purpose, or, having been erected, is set apart for the housing 
of the automobile, it is none the less a 'garage' within the 
meaning of that word in either language. In French the 
word has reference to the place of keeping wagons and 
other vehicles of transportation, as well as automobiles ; 
but in English it appears to have been restricted to motor 
vehicles. 

"The automobile in question was kept in the front end 
of a lean-to 16 feet wide and 26 feet long, attached to plain- 
tiff's barn. By its side was kept a buggy, and fence* or 
partition back of it, to separate the vehicle from the stock. 
As to the automobile, this was a 'private garage,' within the 
meaning of that expression found in the application." White 



REPRESENTATIONS AND WARRANTIES 67 

v. Home Mut. Ins. Assn. of Iowa (1920) — Iowa— 179 N. 
W. 315. 

§67. Waiver of Location Warranty. — A company which 
accepts the premium and issues the policy with knowledge 
of the place where the automobile is actually kept must be 
deemed to have waived any mis-statement with reference 
to its locality. White v. Home Mut. Ins. Assn. of Iowa 
(1920)— Iowa— 179 N. W. 315. 

An automobile fire insurance policy contained the following 
clauses : "Private Garage Warranty. In consideration of 
the reduced rate at which this policy is written it is under- 
stood that the property insured hereunder shall at all times 
be kept or stored in the private garage or private stable 
situated at 1000 So. Harwood Street, Dallas, Texas, Priv- 
ilege, however, to operate car and to house in any other 
building or buildings for a period of not exceeding fifteen 
days at any one location, at any one time, provided the car 
is en route, visiting or being cleaned or repaired, all other 
terms and conditions of the policy remaining unchanged/' 
It was held, in an action on the policy, that evidence that 
the insurance company's general ' agent was informed 
by the insured as to certain visits to other places, and was 
told that the company had no objection and that no written 
waiver was necessary, was sufficient to show a waiver of 
the warranty, the general agent being impliedly authorized 
to make waivers. Commercial Union Assurance Co. of 
London v. Hill, (Tex. Civ. App. 1914) 167 S. W. 1095. 

§68. Other Insurance. — A provision in an automobile fire 
policy that "it shall be null and void if at the time a loss 
occurs there be any other insurance covering the risks as- 
sured by this policy" will prevent recovery where the auto- 
mobile was insured in another company against fire and 
theft under a policy containing a covenant against other 
insurance on the same risks without the consent of the 
insurer, where the second policy is not declared void for 



68 AUTOMOBILE INSURANCE LAW 

breach of the covenant. Dimmick v. Aetna Insurance Co. 

(1919) 213 111. App. 467. In an action on a policy to recover 
for the loss of an automobile which was stolen and burned, 
a defense was that the plantiff had not disclosed other in- 
surance over the car when he applied to the defendant com- 
pany for a policy. The first policy, with another company, 
was one for fire only. The policy in this case was for fire, 
collision and theft, although it was held that the evidence 
supported the insured's theory that she did not apply to the 
defendant company for fire insurance on her car, but applied 
for theft insurance. It was held that the fact, if it were a 
fact, that the company's agent may have filled in the ap- 
plication signed by the plaintiff so as to request insurance 
for fire, theft, etc., unless the plaintiff's attention was called 
thereto when she signed the application, would not of itself 
bar the plaintiff from recovering for damages sustained by 
reason of the theft of her automobile, even although prior 
to that time she had taken fire insurance in another company. 
Dimmick v. Illinois Automobile Fire Insurance Exchange 

(1920) 216 111. App. 543. 

Proof of the existence of other insurance avoiding the 
first policy is sufficiently established by the plaintiff himself 
introducing in evidence the second policy expressly covering 
the same risk, and proof thereof by the defendant insurance 
company is then unnecessary. Dimmick v. Aetna Insurance 
Co., 213 111. App. 467, (1919). 

§69. Other Insurance Does Not Necessarily Forfeit 
Policy. — A clause that the policy will become void if other 
insurance has been taken which covers the property at the 
time of the loss does not necessarily forfeit the policy by 
the taking of other insurance, and is no ground for an action 
for unearned premiums where no notice of such additional 
insurance has been given to the company and no loss oc- 
curred to the property. An insured sued for a return of 
unearned premium from a certain date for the reason that 



REPRESENTATIONS AND WARRANTIES 69 

the policy had become void on that date, when he took out a 
policy in another company covering the loss, this policy pro- 
viding: Tf at the time a loss occurs there be any other in- 
surance, direct or indirect, covering the property described 
therein which would attach if this insurance had not been 
effective, and if such other insurance has been effected with- 
out the special consent, of this company endorsed hereon, then, 
in that event, this insurance shall be null and void." 

As by the very terms of this covenant the policy was only 
to become void in case of other insurance at the time a loss 
occurred, and no loss having occurred, the policy never be- 
came void. The insured might have cancelled the policy he 
had taken out in some other company at any time before a 
loss occurred and if he had done so his rights under the 
first policy would not have been affected by the fact that 
he at one time had insurance in some other company. Healy 
v. Stuyvesant Insurance Co. (1918) 72 Pa. Superior Court, 
168. The court said: "When a policy expressly stipulates 
that the taking out of other insurance without the consent 
of the company shall render the policy void, the insured 
is not entitled to a return of his premium merely because he 
has violated the covenants of his policy. The object of the 
clause is to give the company an opportunity to examine 
into a new factor which may alter its position in the con- 
tract, and to regulate its action accordingly. This oppor- 
tunity it cannot have until the notice is received. The com- 
pany is entitled to notice of such material change in the rela- 
tion of the amount insured to the value of the property, and 
an opportunity to accept and approve the contract in its 
new condition, or to terminate and cancel the insurance in 
the method provided in the policy." 

§70. Misrepresentations as to Ownership. — The Spring- 
field Fire and Marine Insurance Company issued a policy 
of insurance in the amount of $1,000 to the Chero Cola 
Bottling Company on May 22, 1915, for the term of one 



70 AUTOMOBILE INSURANCE LAW 

year, covering an automobile truck, which the insured, in 
an action on the policy, alleged was totally destroyed by 
fire on April 24, 1916, entailing a loss of the full value 
thereof, amounting to $1,300. In the defense filed by the 
insurance company it was alleged that the policy was, ac- 
cording to its own terms and provisions, violated and ren- 
dered inoperative by reason of the fact that the interest of 
the insured was not truly stated therein, and that the "in- 
terest of the insured was other than unconditional and sole 
ownership," as required by the policy, in that prior to the 
date of its issuance the title to the property covered by the 
contract had been conveyed under a bill of sale executed 
by thd insured to the Washington Exchange Bank. A 
further condition of the policy was pleaded, in which it was 
provided that "this entire policy shall be void in case of 
fraud or false swearing by the insured touching any matter 
relating to the insurance or the subject matter thereof, 
whether before or after loss," the defendant averring that 
the plaintiff, in its proofs of loss, was guilty of violating 
these terms of the contract by ifs misrepresentaion and con- 
cealment of the facts as to the property being in any way 
incumbered. The plaintiff sought to meet these defenses 
thus set up by showing that the bill of sale referred to as 
executed by it to the Washington Exchange Bank, though 
absolute on its face, was, in fact, a sale to secure a debt, and 
that since usury was included in that transaction the instru- 
ment was void, and consequently there had been no change 
of title. The verdict was for the plaintiff in the sum of 
$600. The defendant excepted to the refusal of its motion 
for a new trial. It was held that the conveyance of title 
above referred to being a valid 1 one, the policy, according to 
its terms, was thereby rendered inoperative and void. Though 
the note to the bank bore date as of March 8th, the transac- 
tion must, under the evidence, be treated as having been in 
fact closed on March 5th, which was in fact the date shown 
by the bill of sale, and therefore the discount included in 



REPRESENTATIONS AND WARRANTIES 71 

the note was not usurious. Springfield Fire and Marine 
Insurance Co. v. Chero Cola Bottling Co (1918)— Ga. App.— 
96 S. E. 332. 

§71. Change of Ownership, Where an insured automobile 
dealer, without the knowledge or consent of the insurance 
company directly or through any agency, parted with the 
possession of the automobile, delivering it to another under 
a contract for its purchase by the latter, who drove it into 
another state, where it was destroyed by fire, this constituted 
a breach of the required provisions mentioned in the Oregon 
standard policy law, making the "entire policy void unless 
otherwise provided by agreement indorsed hereon or added 
hereto * * * if any change, other than by death of 
an insured, takes place in the interest, title, or possession 
of the subject of insurance," and the insurance company 
was held not liable under its covering notes for the loss. 
Under the presumption of section 799, subdivision 34, L. O. 
L., "that the law has been obeyed," where an insurance 
company's covering note provided that the insurance was 
subject to all the terms and conditions of the automobile 
floater policy in use by the company covering fire, theft, 
and transportation, it must be presumed that the policy con- 
tained the provisions enjoined by the Oregon standard policy 
law (Laws 1911, p. 279), sucK as a provision as to forfeiture 
on change of the insured's interest, title, or possession. 
Cranston v. California Insurance Co. (1919) 94 Or. 369, 185 
Pac. 292. 

Where a policy holder makes a positive statement under 
oath that he was the owner of the automobile at the time 
of its destruction, the insurance company is not bound to 
make further inquiry, and may recover the amount, with 
interest, collected by means of such statement, if it is un- 
true. It is immaterial that the policy holder believed the 
statement made by him to be true. The seller of an auto- 
mobile' reserved title to secure the unpaid purchase price, 



72 AUTOMOBILE INSURANCE LAW 

and also, for further security, retained a fire policy over the 
machine, which provided that a change in title should in- 
validate the policy. The buyer thereafter mortgaged land 
to the seller receiving a few hundred dollars in money and 
the seller returning his note for the price of the automobile, 
which note was destroyed. It was held that in view of the 
Texas statute,, Rev. St. art. 5654, declaring that all reserva- 
tions of title to chattels to secure the purchase money shall 
be held chattel mortgages, there was an absolute sale with 
reservation of a chattel mortgage, so that the policy was 
avoided, the policy declaring that a change in the title would 
invalidate it. Hamilton v. Fireman's Fund Insurance Co., 
(Tex. Civ. App., 1915), 177 S. W. 173. 

§72 Waiver of Conditions as to Ownership. — If, at the 
time of issuing a policy, an insurance company is informed 
that the insured is not the unconditional owner, or if after 
it receives such knowledge, and thereafter fails to rescind 
for an unreasonable time and retains the premium, it thereby 
waives the condition. If, upon the receipt of the proo? oT 
Joss the insurance company rejects the claim upon the sole 
ground that the insured was not the sole and unconditional 
owner of the automobile, it is held all other defenses are 
thereby waived. Where the insurance company knew of 
the character of the insured's title when the policy was is- 
sued, and again when proof of loss was made, and delayed 
to tender back the premium until two months after suit 
was commenced on the policy, the defense that the insured 
was not the sole and unconditional owner as conditioned by 
the policy was waived. Vulcan Insurance Co. v. Johnson 
(1920)— Ind. App.— 128 N. E. 664. 

Though an automobile fire policy provides that a change 
of ownership of the car, without the written consent of the 
insurance company, renders the policy void, and that agents 
of the company cannot waive any provisions of the policy 
unless such waiver is written upon the policy or attached 



REPRESENTATIONS AND WARRANTIES 73 

thereto, yet where the local agent of the company knew, be- 
fore he issued the policy to A, that the automobile had been 
sold by A to B, it was held that the company was bound By 
such knowledge, and was estopped from setting up, as a 
defense to a suit upon the policy, the non-compliance of the 
plaintiff with these provisions of the policy. Commercial 
Union Assurance Co. v. Lyon & Kelly (1915) 17 Ga. App. 
441, 87 S. E. 761. 

§72a. Incumbrances. — A provision in an automobile in- 
surance policy that if the property insured "be or become 
incumbered by a chattel mortgage/' the policy shall be 
void, is valid; and if the insured so incumbers the automo- 
bile, the insurer has the right to insist that its liability under 
the policy became thereby terminated. The purchaser of 
an automobile by absolute sale who, to enable the seller 
to discount the purchase money note, subsequently executes 
an instrument in form a contract of conditional sale, which 
is recorded in the manner prescribed for chattel mortgages, 
thereby incumbers the automobile within the meaning of 
such a policy. Springfield Fire and Marine Insurance Co. 
v. Chandlee (1913) 41 App. D. C. 209. 

In Cottingham v. Maryland Motor Car insurance Co., 
(1915) 168 N. Car. 259, 84 S. E. 274, it is held that where an 
unincumbered automobile is insured under a standard fire 
policy and the insured thereafter gives a mortgage thereon 
which is canceled before the destruction of the car by fire, 
the cancellation of the mortgage revives the original status 
of the policy and puts it again in force. To the same effect 
Gould v. St. Paul Fire & Marine Insurance Co. (1919) — Wash. 
—177 Pac. 787. 



CHAPTER IX. 

Subrogation. 

§ 73. Subrogation of Company to Owner's Rights on Payment of 
Claim. 

§ 74. Same. 

§ 75. Same. 

§ 76. Assignment of Claims Under Policies. 

§73. Subrogation of Company to Owner's Rights on Pay- 
ment of Claim. — An insurance company which has paid for 
damages to an insured automobile injured by the negligence 
of a third party is subrogated to all the rights of the owner 
of the automobile. Allen v. Arnink Auto Renting Co. v. 
United Traction Co. (1915) 91 Misc. (N. Y.) 531, 154 N. Y. 
Supp. 934. See also American Automobile Ins. Co. v. United 
Rys. Co., (1918), 200 Mo. App. 317, 206 S. W. 257. 

When an insurance company has paid the insured for the 
loss which he has sustained by the theft of his car while it 
was in the custody of a repairer, the insurance company 
is subrogated to the rights of the insured and is entitled to 
maintain an action against the repairer in thej name of 
the insured if the jury are satisfied that the car was left in 
the repairer's custody, and was stolen and damaged by reason 
of his negligence. Stevens v. Stewart-Warner Speedometer 
Corp. (1916) 223 Mass. 44, 111 N. E. 771. 

An insurer which has paid the loss under a theft policy, 
and taken an assignment from the insured of all his right, 
title and interest in the automobile, may maintain a suit to 
replevin the car against one claiming to be an innocent pur- 
chaser thereof. Globe & Rutgers Fire Insurance Co. of New 
York v. Adams, (1921),— Mo. App.—, 230 S. W. 345. 

An insurance company insured an automobile under a 
policy providing for subrogation. The machine was struck 

74 



SUBROGATION 75 

and injured by a street car, the owner being personally in- 
jured at the same time. The insurance company discharged 
its liability under the policy and received an assignment from 
the owner of his rights for injury to the car. The owner 
afterwards recovered judgment against the street car com- 
pany for his personal injuries. This judgment did not pre- 
clude a subsequent action by the insurance company under its 
assignment, as owing to the provisions of the policy providing 
for subrogation two causes of action arose out of the ac- 
cident, and there was ,no splitting of causes of action which 
would render a recovery on one a bar to the other. Under- 
writers at Lloyds Insurance Co. v. Vicksburg Traction Co. 
(1913) 106 Miss. 244, 63 So. 425. In its opinon in the 
insurance company's action against the street car company, 
reversing judgment for the defendant, the court said: 
"Appellant had an equitable interest in the automobile at 
the time of the collision by reason of having written the policy 
of insurance. When it was damaged, then, by virtue of the 
contract of insurance and the article of subrogation, appel- 
lant had such an interest in the claim for damages. This 
interest became a right to sue at law when appellant paid to 
Mr. O'Neil (the insured) the amount owning him for loss un- 
der the policy and received from him assignment of his claim 
and was subrogated to his right to recover for damages. 
Therefore, when the suit was filed by Mr. O'Neil on Decem- 
ber 16, 1909, against appellee, the cause of action for re- 
covery for injuries sustained to his person was in Mr. O'Neil, 
and the cause of action to recover for damages to the auto- 
mobile was in appellant. There were then two distinct 
causes of action, two separate rights to recover, in two 
different persons." 

§74. Same. — An owner insured against loss by fire and 
damage by collision, who settled with the wrongdoer for 
damages to the automobile in a collision, giving a full and 
complete release, could not recover on the policy, which con- 



76 AUTOMOBILE INSURANCE LAW 

tained a subrogation clause in the following terms: "If this 
company shall claim that the damage was caused by the act 
or neglect of any person or corporation, private or municipal, 
this company shall, on payment of the loss, be subrogated 
to the extent of such payment to all right of recovery by the 
insured for the loss resulting therefrom, and such right shall 
be assigned to this company by the insured on receiving 
payment." It appeared that shortly after the injury the in- 
sured offered to make an assignment of his right to an at- 
torney for the insurance company, who refused to take it at 
the time for want of full authority to act for the company, 
and because reasonable time had not elapsed to make in- 
vestigation of the injury. Immediately afterwards the in- 
sured filed the claim with the wrongdoer and settled. It 
was held that the insurance company had not waived its 
right to subrogation under the policy. Maryland Motor Car 
Ins. Co. v. Haggard (1914) Tex. Civ. App., 168 S. W. 1011. 
The time when the payment was to be made by the com- 
pany was not specified in the policy; but a reasonable time 
would by law be given the company to make the payment 
of loss and call upon the insured to make the assignment 
of his cause of action against the wrongdoer. And it would 
become the duty of the insured, in order to perform his part 
of the agreement, to continue in a position to make it legally 
possible for him to make a legally effective assignment when 
called upon to do so within a reasonable time by the company. 

A company which has insured a car against theft by a 
policy in force at the time of the theft of the car, which, 
when the theft was reported, paid the policy and took an 
assignment of all the interest of the owners of the car in 
the policy and a bill of sale to the car, may appear as claimant 
on sequestration of the automobile. Dawedoff v. Hooper 
(Tex. Civ. App. 1916) 190 S. W. 522. 

An indemnity company insuring a bus line, which paid a 
judgment obtained by an injured person against the bus 
line, on which he was a passenger, and the driver of another 



SUBROGATION 77 

automobile, in an action in which both were found negligent 
and were held liable for this concurrent negligence, was 
held not entitled to be subrogated to the rights of the in- 
sured bus line against the other defendant. Adams v. White 
Bus Line (1921),— Cal.195 Pac. 389. 

Where an insurance company had paid an owner in full a 
claim for injuries to an insured automobile in a collision 
with a street car, it brought an action in its own name against 
the street car company, it being the only party who had 
suffered any loss. As to whether or not, under the Alabama 
Code, the cause of action could have been prosecuted under 
these circumstances by the insurance company in its own 
name was mooted, but not decided. It was held that, as a 
matter of course, the company had the right to amend its 
complaint by adding as the nominal plaintiff the name of 
the owner of the car, and proceed with the cause as thus 
amended in the name of the owner for the use of the com- 
pany. Birmingham Railway, Light & Power Co. v. Aetna 
Accident & Liability Co. (1913) 184 Ala. 601, 64 So. 44. 

The owner of an automobile having a policy of insurance 
over it instructed a garage company to send for it to be 
stored at the garage. While the garage company's employee 
was taking it to the garage a collision occurred, damaging 
the car. The owner paid the garage company under protest 
for repairs and new parts necessitated by the collision, the 
money being furnished by the insurance company, and sued 
the garage company therefor for the use of the insurance 
company. It was held that the plaintiff was not required to 
prove the interest of the insurance company, as with that the 
garage company had no concern. The only effect of bringing 
the action for the use of the insurance company was to de- 
clare a use for that company. The action in this form 
operated merely as an estoppel on the plaintiff insured to 
deny, as against the company, the latter's right to the pro- 
ceeds. Southern Garage Co. v. Brown (1914) 187 Ala. 484, 
65 So. 400. 



78 AUTOMOBILE INSURANCE LAW 

§75. Same. — In an action by a car owner to recover 
damages in the sum of $500 as a result of a collision of his 
car with a team of the defendant company, the defendant 
introduced, over the plaintiff's objection, a release executed 
by the plaintiff to the Aetna Accident & Liability Company, 
releasing and discharging that company from all liability un- 
der the policy of insurance on the car, for the damages which 
occurred on this occasion. This release was in consideration 
of the sum of $200, and further stipulated that the insurance 
company was subrogated to the amount of such payment to 
the right of recovery of the plaintiff for such loss or expense 
against the persons who caused or contributed to it. The 
rights of subrogation, therefore, as set forth in the release, 
were limited to the amount of the payment of $200. It was 
held that, in a case of this kind, where the owner has been 
reimbursed by the insurance company only partially for 
the loss suffered, and the latter thereby subrogated to the 
rights of the owner only to the extent of the payment of such 
partial loss, the right of action is in the owner, and he may 
maintain the suit in his own name. The question of the 
distribution of the proceeds of recovery in such cases is a 
matter concerning only the owner and the insurance com- 
pany, and with which the wrongdoer is not concerned. The 
release therefore was held inadmissible for the purpose of 
showing that the plaintiff had entirely parted with his right 
of action and that he could not therefore maintain the suit. 
Wyker v. Texas Co. (1918) 201 Ala. 585, 79 So. 7. The court 
quoted from the opinion in Southern Ry. Co. v. Blunt & 
Ward, 165 Fed. 258, where the question was discussed in 
whose name the cause of action should be brought in cases 
of this character, where the owner was reimbursed by the 
insurance company only partially for the loss sustained, as 
follows: "If from the pleadings it appeared that the Trans- 
portation Mutual Insurance Company had p^id to the plaintiff 
only a part of the loss, they would be jointly interested in 
the recovery from the indemnitors, Blunt & Ward, and the 



SUBROGATION • 79 

plaintiff could maintain the action in its own name and re- 
cover the full amount of the loss. As to the amount paid by 
the insurance company, it would become a trustee for said 
company. If the insurance company had paid the plaintiff 
all of the loss, then this suit should be by the insurance 
company alone in the name of the railway company as the 
nominal plaintiff for the use of the insurance company. If 
only a part of) the loss had been paid by the insurer, the 
insured would be entitled to the residue ; and how the money 
recovered is to be divided between them is a matter which 
interests them alone, and in which the defendants are not 
concerned/' Southern Ry. Co. v. Blunt & Ward (1908) 165 
Fed. 258, quoted in Wyker v. Texas Co. (1918) 201 Ala. 585, 
79 So. 7. See also Webb v. Southern Ry Co. (1916) 235 Fed. 
578. 

§76. Assignment of Claims Under Policies. — An action 
was brought in the New Jersey courts upon eight or nine 
different insurance policies, a copy of one of which was 
annexed and the others were said to be of like tenor and 
effect and to contain the same covenants, limitations and 
restrictions. The policies were on automobiles and the 
statement of claim showed the number of the policy and 
the amount insured in it and the loss upon it, but gave no 
other particulars either as to the name of the insured, the 
kind of machine insured or the nature of the loss. The plain- 
tiff's claim was founded upon an endorsement upon the 
policy that the loss, if any, was first payable to the Colonial 
Trust Company and the Automobile Securities Company, 
the plaintiff, as their respective interests might appear. It 
was not alleged that the plaintiff was the owner of any of 
the automobiles, nor was there any statement as to what 
interest it had, if any, in any of them ; nor did the statement 
allege anything as to the fulfillment by the insured of the 
terms of the policy in the event of loss, as to giving notice 
and proof, nor as to what the loss consisted of. It was held 



80 AUTOMOBILE INSURANCE LAW 

that this did not sufficiently show a cause of action, and an 
attachment based on the policies was dissolved. Automobile 
Securities Co. v. Atlas Assurance Co., Ltd. (1919) 67 Pitts- 
burgh Legal Journal, 303. 



CHAPTER X. 

Actions and Defenses. 

§ 77. Voluntary Settlements and Aids in Defense. 
§78. Miscellaneous. 

§77. Voluntary Settlements and Aids in Defense. — The 

settlement by an insurance company of a small loss for which 
it was not liable with an insured who has by mistake applied 
for a policy other than that which he wished (an indemnity 
instead of a direct collision policy) will not estop the com- 
pany from denying liability for a subsequent loss not covered 
by the policy. Browne v. Commercial Union Assurance Co. 
(1916) 30 Cal. App. 547, 158 Pac. 765. Action was brought 
on a policy insuring an automobile against theft and other 
perils. The policy was issued to a company, the Henley- 
Kemball Company, and to the plaintiff's intestate, as their 
interests might appear, and required written notice of loss 
or damage forthwith to the company or the authorized 
agent who issued the policy and a signed and sworn statement 
by the insured within 60 days thereafter, unless the time 
was extended in writing, stating the time and cause of the 
loss. The car was stolen. The time was never extended, 
and the insured, without having rendered a statement, died 
more than 60 days after the loss. The insurance company, 
however, nearly six months thereafter, paid the Henley- 
Eemball Company, which had also failed to render a state- 
ment, the amount of its insurable interest. The plaintiff 
now claimed that this payment operated as a waiver of any 
statement by his intestate, and that he was entitled to the 
amount of insurance, with interest. The car was in the pos- 

81 



82 AUTOMOBILE INSURANCE LAW 

session of the intestate under a conditional sale from the 
Henley-Kemball Company, by the terms of which a certain 
part of the purchase price had been paid in cash while the 
balance was payable by instalments. It was further provided 
that the conditional vendor should effect the insurance and 
pay the premium, which was to be added to the price, and 
upon the final payment of the entire indebtedness a bill of 
sale was to be given. It was contended by the insurance com- 
pany that their relation was analogous to that of mortgagor 
and mortgagee under a policy made payable to the mort- 
gagee as his interest may appear, and, their interests being 
several, the contract of insurance could be enforced by either 
to the extent of his rights in the property, and a settlement 
with one would not bar the rights of the other, if compliance 
with the condition precedent were shown. It was held, how- 
ever, unnecessary to determine the nature or scope of the 
contract, for on the record neither party had any enforceable 
rights. The payment, therefore, was a mjere gratuity, 
which did not operate as a relinquishment by the insurance 
company of the right in this action to insist upon a com- 
pliance with the terms of the policy. Navickis v. Fireman's 
Fund Insurance Co. (1920)— Mass.— 126 N. E. 388. 

An automobile indemnity policy contained the following 
clause : "No action shall lie against the company under this 
policy unless it shall be brought by the assured himself to 
reimburse him for loss actually sustained and paid in money 
by him after trial of the issue, in satisfaction of a final judg- 
ment, against him, nor unless such action is brought within 
ninety days after such judgment has been paid and satisfied 
as aforesaid." While the automobile was being used by a 
director and general manager of the insured corporation on 
his own business it injured a horse, whose owner sued the 
director, Rosenfeld. The corporation notified the insurance 
company of the action and requested the latter to defend 
it, which it failed to do. The insured then defended the suit, 
and employed counsel. On a trial there was a verdict and 



ACTIONS AND DEFENSES 83 

judgment against Rosenfeld. The insured was not a party 
to the action. The insured paid the judgment and sued tKe 
insurance company for the amounls it had paid out on the 
judgment and in defending the suit. 

The insurance company was held not liable. The court 
said : "It cannot be maintained that a stranger who vol- 
untarily employs counsel and defends a suit for tort com- 
mitted by the defendant is by reason of this, if unsuccessful, 
bound for the payment of the judgment against the defendant. 
When the Indemnity Company insured the Distilling Com- 
pany and not Rosenfeld, the Distilling Company could not, 
by its voluntary act in defending the suit against Rosenfeld, 
add to the liability of the Indemnity Company, and thus make 
it indemnify Rosenfeld against the consequences of his neg- 
ligence. If the Distilling * Company had not defended the 
suit brought by Hazel against Rosenfeld, clearly there would 
have been no liability of the Indemnity Company for the pay- 
ment of the judgment against Rosenfeld. To allow the Dis- 
tilling Company, by its voluntary act of defending the suit, 
to bring within the policy a loss for which the insured would 
not otherwise be liable, would be to impose upon the insurer 
a risk it did not assume. " Rock Springs Distilling Co. v. 
Employers' Indemnity Co. of Philadelphia (1914) 160 Ky. 
317, 169 S. W. 730. 

An insurance company is not estopped from asserting a 
breach of its policy by the insured by undertaking the de- 
fense of a negligence action against the insured, relying 
upon a false representation of the insured; nor, apparently, 
can the insured predicate an estoppel on the falsity of his 
own representation even though that is known to the in- 
surer before the trial of the negligence action. Morrison v. 
Royal Indemnity Co. (1917) 180 App. Div. 709, 167 N. Y. 
Supp. 731. 

§78. Miscellaneous. — In an action against an insured 
and his insurer, the trial court properly denied the applica- 



84 AUTOMOBILE INSURANCE LAW 

tion of the defendant indemnity company to amend its an- 
swer to show that the automobile was not covered by the 
indemnity bond, the company offering to prove that the 
insured had sold the car covered some six weeks before the 
accident and purchased a new car which he was using at 
the time and which was not covered by the bond, the appli- 
cation not being made until the trial was almost completed 
and no claim being made that the company did not know 
the facts at the commencement of the trial. Ehlers v. Auto- 
mobile Liability Co. (1919) 169 Wis. 494, 173, N. W. 325. 

It is not a defense to an action on a fire policy, where 
the automobile was destroyed by fire, that the insured was 
negligent. White v. Home Mut. Ins. Assn. of Iowa (1920) 
—Iowa— 179 N. W. 315. 

In an action on an automobile fire policy evidence that 
the car was taken from the place where it was burned to the 
garage of the mortgagee of the car, and that it was after- 
wards disposed of, by whom the evidence did not disclose, 
and the evidence not showing that the local agent had any 
authority in the matter, was held properly excluded. Glaser 
v. Williamsburg City Fire Ins. Co. (1920) — Ind. App. — 125 
N. E. 787. 



PART II 

MATTERS PECULIAR TO THE DIFFERENT KINDS 
OF AUTOMOBILE INSURANCE 



CHAPTER XL 

Fire Insurance. 

§ 79. Introductory. 

§80. Fire Originating Within the Car. 

§81. Reporting Fire Losses — Dealer's Policy. 

§ 82. Care of Automobile by Insured After Damage. 

§83. Valued Policies. 

§ 84. Same; Depreciation in Value, u 

§ 85. Valued Policy Laws. 

§ 86. Deterioration in Value;; Evidence. 

§ 86a. Appreciation in Value. 

§79. Introductory. — A policy insuring an automobile 
against destruction or damage by fire, theft, and the perils 
of transportation is, for pleading purposes at least, a fire 
policy nevertheless. Union Marine Insurance Co. v. Charlie's 
Transfer Co. (1914) 186 Ala. 443, 65 So. 78. 

General reference is made to the preceding chapters, the 
majority of the cases cited in which are concerned with auto- 
mobile fire policies. 

§80. Fire Originating Within the Can — An automobile 
fire policy contained the clause : "It is understood and agreed 
that this policy does not cover loss or damage caused ^T)y 
fire originating within the vehicle. " It was held that the 
fair and natural import and meaning of the clause excluded 
loss by fire, danger of which was inherent in the use or oper- 
ation of the automobile itself without the intervention of 
any outside cause or agency. When, therefore, the auto- 
mobile was damaged by fire originating in an explosion of 
gasolene which, owing to the partial overturning of the auto- 
mobile in a ditch containing water, ran out of its tank upon 
the water, and its vapor, coming in contact with the lighted 
lamps of the automobile, was ignited and exploded, causing 
the fire and the resulting damage, it was held that the fire 
originated within the vehicle, and that the policy did not 

87 



88 AUTOMOBILE INSURANCE LAW 

cover the loss. Preston v. Aetna Insurance Co. (1908) 193 
N. Y. 142, 85 N. E. 1006. 

§81. Reporting Fire Lasses — Dealer's Policy. — A fire in- 
surance contract with an automobile dealer consisted of the 
policy and of a rider or "slip," "Dealer's Form Automobile," 
dated November 24, 1915, apparently attached to the policy 
December 15, 1915, the time when the policy was dated, 
counter-signed and presumably delivered. By the terms of 
the policy and rider the contract covered automobiles held 
by the dealer for sale. A clause of the rider read : "All risks 
attaching hereunder are to be reported to this company as 
soon as known to the insured, but no risk to be binding un- 
less so reported and accepted, and for which a certificate 
is issued signed by a duly authorized agent of the company." 
The clause further provided that? "It is understood and 
agreed that intentional failure to so report such risk as soon 
as known to the assured shall render this entire contract 
null and void." 

In an action on the policy the plaintiff admitted that of 
the 19 automobiles damaged by a fire which occurred, at 
least 13 had not been reported "as soon as known" to him, 
the delay varying from 15 days to 17 weeks. It was held 
that there being no evidence from which compliance with 
these precedent conditions could have been found there 
could be no recovery for damage to the 13 automobiles. It 
was unnecessary for the court to decide whether the jury 
under suitable instructions could have found that either six 
or four of the 19 had been duly reported and certified. The 
plaintiff having offered no evidence that his failure to re- 
port the 13 automobiles "as soon as known" arose from 
unavoidable mistake or excusable inadvertence, and having 
acted voluntarily with full knowledge of the time when he 
acquired title to and possession of each automobile, was con- 
cluded by the second provision of the clause. Cass v. Amer- 
ican Central Ins. Co. (1920)— Mass.— 128 N. E. 716. The 
company never having prepared or provided a form of cer- 



FIRE INSURANCE 89 

tificate for reporting losses as provided by the policy, it was 
held that the lists of automobiles claimed to be damaged in 
a fire which the insured gave to the insurer's general agents, 
who approved them, might be found by the jury to be a form 
of certificate which had been recognized by the company as 
sufficient. 

In an action on a dealer's fire policy, issued February 8, 
1919, the defense was that the insured had failed to comply 
with section 6 of the policy by reporting and making entries 
or certificates of the automobiles owned and for sale by 
them that had been destroyed by the fire. The insured 
alleged in reply that the policy declared upon was but a 
renewal of a previous one issued to the plaintiff by the com- 
pany on February 8, 1918, and that at the time of the is- 
suance of the 1918 policy, Phillip Kaufman, the local agent 
of the defendant company, orally agreed with a member of 
the insured company to go to the plaintiff's place of business 
from time to time, check the plaintiff's books and cars on 
hand, and make the necessary reports and certificates cover- 
ing such cars as were insured, and cancel the insurance of 
such cars as the plaintiff had sold or otherwise disposed of; 
that the plaintiff's agent did so, but that on January 10, 
1919, the defendant by its agents made entries on the pass- 
book referred to in the policy or certificates covering six 
of the cars later burned, but by mistake omitted six of tfie 
cars later burned which had been reported. The question 
in the case was one of waiver ; whether the company's agent 
could and did waive the requirements of paragraph 6 of the 
policy. The company is and was, at the times of the issuance 
of both policies, a California corporation, doing business in 
Texas, and evidently requiring the employment of agents 
in that state, Phillip Kaufman was its agent in the city of 
Abilene, and as such issued both policies. The court held 
that the evidence tended to show that at the time of the 
issuance of the 1918 policy Kaufman made the agreement 
to himself make the proper entries upon the passbooks or 



90 AUTOMOBILE INSURANCE LAW 

certificates as an inducement to the plaintiffs to insure their 
automobiles in his company. 

The Texas Court of Civil Appeals held, on the authority 
of Wagner & Chabot v. Westchester Fire Insurance Co. 
92 Tex. 549, 50 S. W. 569, that the requirements of section 
6 of the policy were waived by the company's agent, Kauf- 
man. The court said: "It may not be amiss, however, to 
further say that Phillip Kaufman, under the terms of our 
statutes (V. S. Tex. Civ. Statutes, art. 4961) was an agent of 
the appellant company 'as far as relates to all the liabilities, 
duties, requirements, and penalties set forth' in the chapter 
of which the article is a part. The policy declared upon was 
issued by him, and the evidence shows it was in fact not for- 
warded to the company for approval. He knew or thought he 
knew the particular automobiles which it was his purpose 
to insure. Not only the policy in terms declares that it was 
its object and intent to cover, subject to conditions named 
in the policy, every automobile owned and for sale by the 
insured, but Phillip Kaufman testified that such was his pur- 
pose at the time of the issuance of the policy of February 
8, 1919. We think the transaction must be construed as one 
in which the policy of 1919 was but a renewal of the policy 
of 1918, even though strictly and technically it should be 
construed otherwise, and that evidently the agents issuing 
the policy of February 8, 1919, had in mind the report and 
certificate made in November and January under the old 
policy, and therefore were content to make no further in- 
vestigation. Under such circumstances, we think the issue 
of waiver presented by the appellees in this case must be 
maintained, and that the mistake of the agent in omitting 
from the certificates made on January 10, 1919, automobiles 
then actually on hand and later actually destroyed by the 
fire ought not to be made chargeable to the appellees." 
California Insurance Co. v. Bishop (1920) — Texas Civ. App. — 
228 S. W. 1010. 



FIRE INSURANCE 91 

§82. Care of Automobile by Insured After Damage. — In an 

action on a policy over an automobile which was totally de- 
stroyed by two fires occurring a few days apart one of the 
defenses was failure and neglect of the insured to protect 
and safeguard the automobile from further damage after the 
first fire occurred. It was held that the insurance company 
could not thus defeat recovery, since the policy contained no 
clause requiring the insured to further safeguard the car 
after the first fire. St. Paul Fire & Marine Insurance v. 
Huff (1915)— Tex. Civ. App.— 172 S. W. 755. 

§83. Valued Policies, — Long prior to the enactment of the 
valued policy statutes valued policies were in use as the 
result of contracts. By a valued policy a valuation was 
fixed in advance by way of liquidated damages to avoid 
making a valuation after the loss had occurred. Such agree- 
ments have been uniformly upheld against the claim that 
they were wagering contracts; the construction put upon a 
valued policy being that the sum agreed upon was conclusive, 
both at law and in equity, save in cases of fraud. Daggs v. 
Orient Insurance Co. of Hartford, 136 Mo. 382, 38 S. W. 85. 
And where the automobile is insured at a sum so much be- 
yond its worth that the gross overvaluation amounts to af- 
firmative fraud upon the insurance company, this will avoid 
a valued policy. Hoffman v. Prussian National Insurance 
Co. (1918) 181 App. Div. 412. 

§84. Same; Depreciation in Value. — From the decisions 
cited in the immediately following sections, it would appear 
that the sum stated in the policy is conclusive as to the value 
of the automobile at the date of insurance only, but not at 
the time of loss. This would seem to be the reasonable rule, 
so far as automobile insurance is concerned, as it is a well 
known fact, which both parties must be assumed to have 
had in mind when the insurance was effected, that automobiles 
depreciate in value very rapidly, even when not in active 
service. The point has not, however, been definitely decided. 



92 AUTOMOBILE INSURANCE LAW 

§85. Valued Policy Laws* — The Missouri statute (section 
7030, R. S. 1909), which provides: "No company shall take 
a risk on any property in this state at a ratio greater than 
three-fourths of the value of the property insured, and when 
taken, its value shall not be questioned in any proceeding," 
applies to insurance written on personal as well as real 
property, and therefore applies to automobile insurance. It 
appears to be something more than what is usually regarded 
as a valued policy statute, in that it carries an inhibition 
against every insurance company in taking a risk at a ratio 
greater than three-fourths of the value of the property. 
"Such being true, it estops the insurer, after the issuance 
of a valid policy, from disputing that the subject-matter 
of the insurance was of the value, at the time the policy was 
issued, not only equal to the amount of the insurance written 
thereon, but one-fourth more, as well." Farber v. American 
Automobile Insurance Co. (1915) 191 Mo. App. 307, 177 S. W. 
675. 

In this case the court also said, however: "It seems to be 
entirely clear that the statute is designed only to conclude 
the matter of the value of the subject of insurance stipulated 
in a policy contract fairly entered into with respect to such 
valuation. In other words, false and fraudulent representa- 
tions of fact, not mere expressions of opinion, designedly 
made with sinister motive relative to the value of the prop- 
erty as an inducement to the contract of insurance fixing 
the valuation, if believed and acted upon by the insurer so 
as to cause the company to issue a policy considerably in 
excess of the true value of the property at the time, should 
be regarded not only as material to the risk but sufficient 
to render the contract void from its inception. In this view, 
such matter may be shown in defense notwithstanding the 
valued policy statute." The words "when taken" imply that 
the negotiations antecedent to the policy shall be honest and 
fair as to material matters, to the end that a valid contract 
as to value may be had. 



FIRE INSURANCE 93 

The Missouri statute becomes a part of the policy and a 
defendant company is precluded from denying the value of 
an insured automobile at the time the policy was written. 
Wolff v. Hartford Fire Ins. Co. (1920)— Mo. App.— 223 S. W. 
810. The statute, however, goes no further than to es- 
tablish conclusively the value of the automobile at the date 
of the policy. And, where the property insured is personalty 
of a changing character, which is subject to diminution or 
depreciation, such as an automobile, and the policy provides 
that the insurer shall not be liable beyond the actual cash 
value of the property at the time of the loss, the extent of 
the insured's demand and of the insurer's liability is, in the 
case of a total loss, the value of the property at the time of 
its destruction by fire, and this question of the value of 
the property at the time of the fire is open to dispute and 
litigation. And the burden is on the plaintiff to show the 
value of the property at the time of the fire. Strawbridge v. 
Standard Fire Insurance Co. (1916) 193 Mo. App. 687. In 
this case the court said that as between the parties in an 
action on a valued policy, "the value of the car, in respect 
of insurance, means its actual value as an instrumentality 
for continued use. If, through no depreciation inherent in 
the car itself by reason of the lapse of time, use, injury, or 
damage, the car, as an instrumentality for continued use by 
the insured, is worth as much or more than the amount 
claimed, the insurer cannot complain. He cannot add to 
that actual inherent depreciation the decrease in the price 
it would bring simply because it is not a new, but is now 
a used or second-hand car." In other words, the only 
diminution on the value, as fixed by the statute and the 
policy, "which could be considered in determining the loss 
for which payment can be demanded as insurance, is the 
inherent depreciation in the machine itself tjirough use, 

injury, or damage, accruing to it subsequent to the date of the 
policy." 

In an action on a Missouri fire policy for $2,000, it was 



94 AUTOMOBILE INSURANCE LAW 

held correct to instruct the jury, in view of the valued policy 
law, that the automobile was worth $2,666.66 when insured; 
and that they should deduct from that amount any sum that 
they found the car had depreciated in value from the date it 
was insured to the date it was burned. Zackwik v. Hanover 
Fire Ins. Co. (1920)— Mo. App .— 225 S. W. 135. 

Where the insurer, by the terms of the policy, is not re- 
quired to pay more than the value of the car at the time of 
loss, and the insured refuses to tell or discuss the value, but 
brings suit for the full amount of the policy less a small 
credit for the wreckage sold, so that the insurer cannot 
ascertain, without litigation, what the true condition and 
value at the time of the loss were, there is no' room for the 
charge of a vexatious refusal to pay warranting the recovery 
of a penalty under the Missouri statute (Mo. Rev. Stat. 1909, 
7068). Strawbridge v. Standard Fire Insurance Co. (1916) 
193 Mo. App. 687. 

Any provision in an automobile fire policy written since 
March 25, 1909, in conflict with the provision of the stan- 
dard form of policy of the state of Oklahoma, provided by 
the Act March 25, 1909 and section 3482, Oklahoma Re- 
vised Laws 1910, will not be enforced by the Oklahoma 
courts. Section 3482 provides that the insurance company 
shall not be liable beyond the actual cash value of the pro- 
perty at the time any loss or damage occurs, and the loss 
or damage shall in no event exceed what it would then cost 
the insured to repair or replace the same in material of like 
kind and quality. The value of an automobile wholly de- 
stroyed by fire under an Oklahoma policy written since the 
25th of March, 1909, cannot be fixed by the policy, but must 
be determined by the actual value of the car destroyed at 
the time of its destruction. When, in an action upon an 
Oklahoma fire policy in the sum of $3,000, for the destruc- 
tion of the insured automobile by fire, the evidence was in 
conflict as to the value of the automobile destroyed, it was 
held reversible error for the court to instruct the jury that, 



FIRE INSURANCE 95 

if they found for the plaintiff, they must find for the face 
value of the policy. The question of the value of the car 
should have been submitted to the jury. Palatine Insurance 
Co. of London v. Commerce Trust Co. (1918)— Okla.— 175 
Pac. 930. 

§86. Deterioration in Value; Evidence. — An attorney at law 
who testified that he had "personally owned three machines 
during the period of the last five years, and have personally 
had the experience of having a machine wrecked, and I have 
been attorney for different automobile concerns and in that 
way keep in touch with the business," and that he had fre- 
quently ridden in the automobile in question, was held not 
qualified to testify as an expert on the question as to whether 
or not there was any deterioration in the value of the car be- 
tween the time the policy was issued and the time of the loss. 
The court said : "One may own an automobile, or several of 
them, in fact, and yet never acquire any knowledge of the 
mechanism thereof, nor what parts thereof are subjected to 
the greatest amount of wear and tear; nor would mere own- 
ership of an automobile necessarily give any knowledge of the 
relative value of a particular car at fixed dates ; nor would 
the fact that one who had been the owner of several auto- 
mobiles had ridden in a particular machine a number of times, 
without more, throw any light upon the question as to 
whether or not he possessed sufficient knowledge, skill, or 
information to qualify him as an expert upon such subject." 
Wolff v. Hartford Fire Ins. Co. (1920)— Mo. App.— 223 S. W. 
810. 

In an unreported case in the federal district court for the 
Northern District of New York, McConihe v. St. Paul Fire 
& Marine Ins. Co., which was an action on a valued policy 
allowing the insurance company the option to repair, expert 
testimony was admitted to show that even if an automobile 
had never been used its cash value would have depreciated 
25 per cent. 



96 AUTOMOBILE INSURANCE LAW 

§86a. Appreciation in Value. — An automobile may appre- 
ciate, as well as depreciate, in value. 

In a recent English case it appeared that a proposal form 
for the insurance of an automobile contained a table of rates 
based on the "full value of the car," but stated that cars 
under a certain price and horse-power could be accepted 
at a lower rate. Under the latter offer the car was insured 
in 1915, and under the heading '."Particulars of Car," the 
insured filled in his "estimate of present value" as £250. By 
the policy the insurer agreed to indemnify the insured "to 
an amount not exceeding the full value of the car." The 
policy was renewed from year to year till 1919, when the 
car was detroyed by fire, the policy being still in force. The 
car had appreciated in value. It was held that on the last 
renewal of the policy the insured must be deemed to have 
renewed his estimate of the "present value" of the car as 
£250, and if at that date the car was worth more the insured 
could recover only that amount, but if all the increase in 
value took place after that date the insured was entitled 
to recover the full value of the car at the time when it was 
destroyed. Wilson v. Scottish Insurance Corporation, 
Limited, [1920] 2 Ch. 28; 89 L. J. (Ch.) 329; [1920] W. C. 
& Ins. R. 107; 123 L. T. 404; (1920) W. N. 169; 36 T. L. K. 
545 ; 64 S. J. 514. 



CHAPTER XII. 

Theft Insurance. 

§ 87. Intent to Steal Necessary. 

§ 88. "Joy Riding." 

§ 89. Intent Shown. 

§ 90. Taking By Trick or Device Not Covered. 

§ 91. Mere Trespass Not Theft. 

§ 92. Conditional Sales. 

§ 93. Special Contract As to Conversion — Dealer's Policy. 

§ 94. Conversion by Bailee Not Covered. 

§ 95. Theft by Person in Insured's Employment. 

§ 96. Theft by Person in Insured's Household. 

§ 97. Time for Reporting Loss by Theft. 

§ 98. Theft of Equipment. 

§ 99. Proof of Theft. 

§100. Cars Recovered After Theft. 

§101. Time Within Which Recovered Car Must be Taken Back. 

§102. Extent of Loss by Theft. 

§103. Unauthorized Change in Contract. 

§87. Intent to Steal Necessary.— It is well settled that 
there must be intent to steal to make an insurance company 
liable under a policy insuring against "theft, robbery or 
pilferage." One cannot be convicted of either theft, rob- 
bery or pilferage unless he had the intent to steal ; and there 
is no authority for giving any different meaning to these 
words in a contract of insurance in which it is stipulated 
that the company will be liable for loss or damage to an 
automobile, resulting from theft, robbery, or pilferage. If 
the person taking the automobile had the animus revertendi, 
the intention to return it, he is not guilty of theft, or robbery, 
or pilferage, even though he took the machine without the 
owner's consent. Hartford Fire Insurance Co. v. Wimbish 
(1913) 12 Ga. App. 712, 78 S. E. 265; Michigan Commercial 
Insurance Co. v. Wills (1914) 57 Ind. App. 256, 106 N. E. 725. 

The intent to steal is a necessary ingredient in all three 
offenses. Phoenix Assurance Co. v. Epstein, (1917) 73 Fla. 

97 



98 AUTOMOBILE INSURANCE LAW 

991, 75 So. 537, Hartford Fire Insurance Co. v. Wimbish 
supra.* 

Such a policy does not cover a loss where the automobile 
was wrecked while lawfully in the possession of an em- 
ployee of a garage company, under instructions to deliver 
it to the owner, although the employee went out of his way 
in making the trip.. Stuht v. Maryland Motor Car Insur- 
ance Co. v. Wimbush (1913) 12 Ga. App. 712, 78 S. E. 265. 

The fact that the person taking the automobile was guilty 
of a misdemeanor under the st^te "automobile act" would 
not authorize a recovery by the owner, if there was no 
showing of an intent to steal. Hartford Fire Insurance 

Co. v. Wimbish (1913) 12 Ga. App. 712, 78 S. E. 265, 

An automobile insured against "theft, robbery, or pilferage" 

was taken from the owner's garage without his knowledge 
by persons unknown and returned in a damaged condition. 
The owner's statement of claim to the insurance company 
set forth a loss of $97.80, including for tools, $4.20; repair bill, 
$63.60 ; vulcanizing inner tubes, $5 ; damage to top and cur- 
tains, $25 ; and unearned premium, $6.50, (the insurance com- 
pany having canceled the policy prior to its termination 
by its terms). It was held that the damage and loss were 
not within the terms of a policy providing against "theft, 
robbery, or pilferage" ; that "pilferage" has but one meaning 
and is some form of stealing. Felgar v. Home Insurnace 
Co. of New York (1917) 207 111. App. 492. 

§88. "Joy Riding." — It follows from what has been said 
that an owner cannot recover on a finding of facts showing 
that his automobile was wrongfully taken for the purpose 
of a "joy ride," but not disclosing any intention to steal it. 
Michigan Commercial Insurancce Co. v. Wills (1914) 57 
Ind.. App. 256, 106 N. E. 725; Phoenix Assurance Co. v. 
Epstein (1917) 73 Fla. 991, 75 So. 537. 

An automobile insured against loss resulting from theft 
was left in a paint shop by the owner to be repainted. Men 
employed in the shop appropriated it for the purpose of 



THEFT INSURANCE 99 

taking a joy ride, in the course of which it was injured. It 
was held that the car was not stolen, and the insurance com- 
pany was not liable under the policy. The fact that the 
taking was altogether wrongful and that it was the intention 
of the men to appropriate the car to their own use during the 
ride and to that extent to deprive the owner of the use of 
their property was not : sufficient to constitute their acts 
larceny. They must have had a criminal intent — the inten- 
tion to steal the car, to permanently deprive the owner 
thereof. Valley Mercantile Co. v. St. Paul Fire & Marine 
Ins. Co. (1914) 49 Mont. 430, 143 Pac. 559. 

889. Intent Showiv — An automobile dealer's employee, 
on being discharged because of dull business, borrowed an 
automobile from the dealer to search for employment, 
promising to return it in a day or two. After trying to 
sell it within the state (Kentucky) he drove it to Missouri, 
where it was found some six or seven weeks later in a 
remote part of the state in a badly battered and damaged 
condition. It was held that this was as effectual a conver- 
sion as if he had actually sold the machine and appropriated 
the proceeds. Federal Insurance Co. v. Hiter (1915) 164 
Ky. 743, 176 S. W. 210. 

In an action on an automobile theft policy, it was held that 
the evidence showed a theft with felonious intent where it 
appeared that a discharged servant of the plaintiff, whose 
duties in the plaintiffs employment did not include driving 
an automobile, unlocked the garage and put the batteries and 
other equipment on the car and drove it away without the 
owner's knowledge or consent, and the equipment was not 
on the car when it was returned by him in a damaged con- 
dition. Pask v. London & Lancashire Fire Insurance Co. 
(1915) 211 111. App. 271. 

§90. Taking by Trick or Device Not Covered, — The or- 
dinary theft policy does not cover larceny by trick or de- 
vice, involving the deception of the insured. An owner 



100 AUTOMOBILE INSURANCE LAW 

insured against direct loss or damage by theft, robbery or 
pilferage gave it into the possession of a corporation for 
the purpose of having it sold. In an action on the policy the 
complaint alleged that the corporation, pursuant to a con- 
spiracy and with felonious intent, procured a large number 
of owners, including the plaintiff, to deliver them their auto- 
mobiles for sale, and thereafter converted and stole the 
car. It was held that this complaint did not state facts suf- 
ficient to constitute a cause of action. The court said: 
"While this policy insures against 'theft/ it seems clear that 
it was not the intention of the parties to the contract of 
insurance to insure against larceny by trick and device ; that 
is, theft, the commission of which involves, as an essential 
element, the deception of the insured, resulting in a sur- 
render of the possession of his property. The term 'theft/ 
as used in this policy, does not include all forms of larceny 
recognized by law. It does not include a larceny perpetrated, 
as this was, under the form and guise of a business trans- 
action, conducted by the insured himself." Delafield v. 
London & Lancashire Fire Ins. Co. (1917) 177 N. Y. App. 
Div. 477, 164 N. Y. Supp. 221. 

If the insured, the owner of the automobile, was deprived 
of its; possession by reason of an honest dispute with the 
taker as to his title and possession, the taker merely using 
a trick to obtain what he thought was his property, the 
insured's damages are not covered either by the direct terms 
or even liberal intendment of the policy. Rush v. Boston 
Insurance Co. (1914) 88 Misc. (N. Y.) 48, 150 N. Y. Supp. 
457. The court said: "To recover under such a policy the 
insured must unquestionably show that the car was stolen. 
He has no cause of action against the insurance company, 
even though he has been wrongfully deprived of his pro- 
perty, unless he has been so deprived of his property fel- 
oniously. The criminal intent, however, in such cases must 
usually be gathered from the surrounding circumstances, 
and proof of the taking by trick and device would be suf- 



THEFT INSURANCE 101 

ficient to allow an inference of felonious intent. Never- 
theless, this inference would be completely rebutted if tfie 
insurance company can show that the taker of the car acted 
under an honest belief that he was entitled to the possession 
of it, and merely used a trick to obtain what he thought was 
his own property." 

§91. Mere Trespass Not Theft. — A mere trespass will not 
render the insurance company liable under a theft policy. 
The wife of one A — was the owner of an automobile 
and gave her husband a power of attorney to sell it. He sold 
it to Bigus who took possession of it and fastened the doors 
of the barn where it was kept. He then insured the car 
against "direct loss by burglary, theft or larceny." Shortly 
afterwards A's wife, who had some difficulty with her 
husband, took the car from the barn and transferred it to 
another barn. Bigus notified the insurance company of the 
loss of the car, which could not be found, and he then brought 
suit on the policy. It was held that the policy only covered 
a felonious asportation or taking, and it was manifest that 
the taking shown was, at most, a trespass against which there 
was no insurance. Bigus v. Pacific Coast Casualty Co. (1910) 
145 Mo. App. 170, 129 S. W. 982. 

§92. Conditional Sales. — The owner of an automobile, in- 
sured against theft, robbery or pilferage, placed the car in 
a garage, under an agreement with the garage keeper that 
the latter should pay him a specified sum therefor, payment 
to be made after the garage keeper had sold the car. The 
garage keeper disposed of the automobile the same day for 
a less sum, and converted the proceeds to his own use. The in- 
surance company was held not liable under the policy, under 
New York Sales Act, § 100, providing that, when goods are 
delivered to the buyer on sale or return, the property passes 
to the buyer on delivery. Siegel v. Union Assur. Soc. (1915) 
90 Misc. (N. Y.) 550, 153 N. Y. Supp. 662. 



102 AUTOMOBILE INSURANCE LAW 

A policy insured the owner of a motorcycle and one Arthur, 
"as interest may appear," against theft, robbery and 
pilferage, the owner having sold the machine to Arthur on 
a conditional bill of sale. Arthur left the state with the 
machine. He claimed that it had been stolen from him and 
gave notice to the insurance company. Arthur assigned his 
claim against the insurance company to the owner. The 
insurance company, after investigation, became satisfied that 
the machine had not been stolen from Arthur and denied its 
liability to the owner. In an action by the owner it was held 
he was entitled to recover the amount due and unpaid him 
for the purchase price. Neal, Clark & Neal Co. v. Liverpool 
& London Globe Ins. Co. (1917) 178 App. Div. 730, 165 N. 
Y. Supp. 204. 

§93. Special Contract as to Conversion. — Dealer's Policy. 

— An automobile dealer, in conversation with the agent of an 
insurance company, who was seeking the dealer's business, 
told him that he desired to be protected in all cases of lease 
contracts. The agent promised that his company would 
fully protect the dealer if he would insure his automobiles 
with it, and stated, according to the dealer, that the policies 
of the company would be protection against "fire, theft, and 
wrongful conversion," and that he would have the company 
write the dealer to that effect. In accordance with this un- 
derstanding, the company's secretary wrote the dealer on 
June 8, 1916. that the company would from that date extend 
policies on all cars in which the dealer had an equity to cover 
any claims arising under specified conditions, one of which 
was : "If the conditional buyer of an automobile, or any mem- 
ber of his immediate family, should steal any automobile 
insured under our policies, and thereby commit a felony, 
upon warrant being secured for the arrest of such party or 
parties, the company hereby agrees that your equity in any 
automobile insured by this company will be fully protected." 
This instrument was never recalled. The dealer sold a car 



THEFT INSURANCE 103 

to a customer on installments and a policy was issued by 
the company on June 12, 1917, covering the parties' interests. 
On September 15, 1917, the vendee of the car disappeared 
from the neighborhood, taking the car with him. It was held 
in an action against the insurance company that the letter 
of June 8, 1916, and the policy constituted one contract ; 
and that the letter became a part of every contract of in- 
surance entered into between the parties after its date, unless 
expressly excluded from such contracts. The word "steal" 
was held to have been used by the parties in the above agree- 
ment in its broad and colloquial sense, to include embezzle- 
ment or wrongful conversion by the vendee, this being what 
the letter was given to protect the insured against. Conver- 
sion of the automobile was held shown by evidence that the 
conditional vendee took the automobile out of the state with- 
out the seller's knowledge or consent; that he concealed it, 
so that the seller could not locate it by the aid of detectives ; 
and that installments on the price had not been paid since 
the date of the disappearance of the car. Buxton v. Inter- 
national Indemnity Co. (1920)— Cal. App.— 191 Pac. 84. 

§94. Conversion by Bailee Not Covered. — An owner 
brought suit for the value of an automobile under a policy 
protecting her against "theft, robbery or pilferage, excepting 
by any person or persons in the insured's household or in 
the insured's service or employment, whether the theft, rob- 
bery or pilferage occur during the hours of such service or 
employment or not." The evidence disclosed that the plain- 
tilt had been induced to purchase the car, a second-hand one, 
by virtue of the representations of one Miller, an auto- 
mobile mechanic, who at the time of the purchase was a 
lodger of the plaintiff ; that shortly thereafter the car got out 
of order, and that the plaintiff stated to Miller, who in the 
.meantime had removed from the plaintiff's residence, that it 
was "up to him to fix it"; that the car was turned over to 
Miller for such purpose under the statement quoted, and 



104 AUTOMOBILE INSURANCE LAW 

without any understanding that Miller was to receive com- 
pensation for his services in repairing it. The evidence in- 
dicated that after the car had been entrusted to Miller he 
fraudulently converted it to his own use. Upon these facts 
a non-suit was granted, which was affirmed on appeal for the 
following reason : "Under the terms of such a policy, written 
to indemnify an owner against loss by 'theft, robbery or pil- 
ferage/ the usual and ordinary meaning of these words, in- 
volving the wrongful and fraudulent taking and carrying 
away of the article stolen, should have application, and the 
reasonable intention of the contract should not be extended 
to cover the fraudulent conversion by a bailee of the property 
so entrusted. The true and manifest intent and spirit of 
the contract should not be so technically construed as to re- 
quire that it partake of the nature of a blanket fidelity bond 
guaranteeing the integrity of all such persons as may be 
entrusted by the owner with the possession and control of 
the article covered by the policy of insurance. ,, Gunn v. 
Globe & Rutgers Fire Insurance Co. (1919) 24 Ga. App. 615, 
101 S. E. 691. 

§95. Theft by Person in Insured's Employment — A usual 
exception in a theft policy is theft by a person in the in- 
sured's service or employment. A taking by such a person 
is not within the policy, and damage resulting from such 
taking is not covered. Phoenix Aussurance Co. v. Epstein 
(1917) 73 Fla. 991, 75 So. 537. 

To be in the service or employment of the insured, within 
the meaning of such a policy, a person taking the automobile 
must have been subject to the control and direction of the 
insured and bound to render him personal service. The em- 
ployee of a public garage keeper, at whose garage the car 
was kept, is not in the insured's employ, and the policy 
covers theft by such a person. Schmid v. Heath, (1912) 173 
111. App. 649. 

Where the insured automobile was stored in a garage be- 
longing to a corporation of which the owner of the insured 



THEFT INSURANCE 105 

car was president, evidence that the caretaker of the garage 
was implicated in the theft of the car, which was afterwards, 
while in his possession, wrecked in a collision, was held in- 
sufficient to establish that the damage was done by one in 
the employment or service of the insured within the meaning 
of the policy. Callahan v. London & Lancashire Fire Ins. Co. 
(1917) 98 Misc. (N. Y.) 589, 163 N. Y. Supp. 322. 

Under a theft policy excepting theft by persons in the in- 
sured's household or service or employment it was held that 
the company was liable to the owner who had given the keys 
of his garage, in good faith, for the purpose of having his 
car washed, but without undertaking to pay anything for the 
service, to a chauffeur in the employment of another, who 
used the car for his own personal purpose, resulting in the 
wrecking of the car. Ouimet v. National Ben Franklin Fire 
Insurance Co. (1920) Que. C. R. 56 Dom. L. R. 501. 

The question whether the automobile was or was not 
stolen by a person in the insured's employment may be a 
question for the jury. The salesman of a Detroit firm of 
automobile manufacturers, engaged in selling cars for his 
employers, was using a new car for demonstration purposes. 
The company gave the salesman special permission to take 
the car out in the evening, contrary to its usual rules, to 
demonstrate to prospective customers. He took the cus- 
tomers for a ride, and left the car in front of a hotel for 
twenty minutes. When he returned it was gone. In an 
action on a theft policy it was held error to direct a verdict 
for the plaintiff. The evidence of theft was purely circum- 
stantial and the fact that some one in the plaintiff's service 
had no guilty participation in the disappearance of the car 
was not indisputably established. The jury might infer from 
the circumstances, the delay of the salesman to report the loss 
till next morning, giving the thief a start of ten or twelve 
hours, that he was privy to the taking of the car, or that he 
was innocent. The credibility of the salesman and the bona 
fides of his conduct with reference to the theft were issues 



106 AUTOMOBILE INSURANCE LAW 

for the jury. Kansas City Regal Auto Co. v. Old Colony Ins. 
Co. (1915) 187 Mo. App. 514. 

§96. Theft by Person in Insured's Household—Theft by 

a member of the insured's houshold is also usually excepted 
from the risks insured against. The theft of an insured auto- 
mobile by the owner's nephew, while the nephew was residing 
with the insured as his guest, falls within the exception of 
theft by "any person or persons in the assured's household, 
or in the assured's service or employment. ,, While such a 
policy was in force the insured's nephew, about 18 years of 
age, came to his uncle's house in Baltimore on February 3, 
1919, for a visit, the prospective duration of which was not 
disclosed. Some time during the night of February 7th, tfie 
nephew went to his uncle's bedroom while the latter was 
sleeping, took the switch key of the automobile from his 
uncle's pocket, went to the garage where the automobile was 
stored, and by misrepresentations (that his uncle was dying 
and it was necessary to fetch a doctor) induced the watchman 
to take it out. He drove the car to Alexandria, Va., where 
he sold it. He was subsequently arrested and pleaded guilfy 
to larceny of the car in (Baltimore. The car was discovered 
several days after the theft in a garage in Alexandria. It was 
not in running order and bore evidence of severe usage. The 
insured took possession of it, had temporary repairs made, 
brought it to Baltimore, sold it for $1,200, though it had cost 
him $2,120, and claimed of the insurance company as a loss 
under the policy the difference between the initial cost of the 
car, plus repairs and the selling price. 

The trial court held that under the language of the policy 
the insurance company was not liable and the automobile 
was excepted from the policy. Judgment for the insurance 
company was affirmed, the court saying that the object and 
purpose of an exception such as this is "to guard the company 
against liability for such thefts as we have in this case, and 
to prevent fraud and collusion by and between the assured 
and persons in a household or in the assured's services or 



THEFT INSURANCE 107 

employment." Rydstrom v. Queen Insurance Co. of Amer- 
ica. (1921)— Md.— 112 Atl. 586. 

§97. Time for Reporting Loss by Theft. — The time for 
rendering statement of loss commences to run from the time 
of theft, and not from the time that the insured discovered 
it. But the insurance company may waive the requirement 
as to rendering the statement by denying liability before the 
expiration of such time. Neal, Clark & Neal Co. v. Liverpool 
& London & Globe Ins. Co., (1917) 178 App. Div. 730, 163 
N. Y. Supp. 204. 

§98. — Theft of Equipment. — A provision in a theft policy 
"excepting in any case other than in case of total loss of the 
automobile described herein, the theft, robbery or pilferage of 
tools and repair equipment" does not mean that the company 
is only liable for the whole automobile when there is a total 
loss, but means that the company is only liable for the loss 
of the tools when there is a total loss of the automobile. 
Ouimet v. National Ben Franklin Fire Insurance Co. (1920) 
Que. C. R. 56 Dominion L. R. 501 ; See also Pask v. London 
& Lancashire Fire Insurance Co. (1915) 211 111. App. 271, 
§ 96 supra. 

§99. Proof of Theft.— Theft must be determined by the 
facts attending the taking of the automobile. The mere state- 
ment of a witness in a civil action concerning an insured auto- 
mobile that the car "was stolen" is insufficient. Federal In- 
surance Co. v. Munden (1918)— Tex. Civ. App.— 203 S. W. 917. 

An action to recover under a policy of automobile insur- 
ance against theft is a civil action, and the plaintiff is required 
to prove his case only by a preponderance of the evidence ; 
the rule being the same as it is in civil cases generally. Buxton 
v. International Indemnity Co. (1920)— Cal. App.— 191 Pac. 
84 ; but, to recover at all, he has the burden of proving every 
element of the crime of larceny. Valley Mercantile Co. v. 
St. Paul Fire & Marine Ins. Co., (1914) 49 Mont. 430, 143 Pac. 
559; Phoenix Assurance Co. v. Eppstein (1917) 73 Fla. 991, 



108 AUTOMOBILE INSURANCE LAW 

75 So. 537 (where the evidence adduced by the plaintiff, not 
detailed in the opinion, was held not to measure up to this 
requirement). The failure of the insurance company to offer 
any evidence in rebuttal of the plaintiff's evidence as to theft 
does not alone warrant the direction of a verdict for the 
plaintiff. Kansas City Regal Auto Co. v. Old Colony Insur- 
ance Co. (1915) 187 Mo. App. 514. Where the evidence does 
not conflict, the question of whether the car was stolen is for 
the court. The following testimony for the plaintiff, being 
undisputed, was held insufficient to take the question of the 
theft of an insured car to the jury. It appeared that the 
plaintiff (the insured) was out of the city where he lived and 
had left the car in charge of a third party; that the latter 
had used it on the day in question, and parked it near his 
office, and on his return later it was gone. Judgment for the 
plaintiff, on a directed verdict, was affirmed. Stone v. Amer- 
ican Mutual Auto Insurance Co. (1921)— Mich.— 181 N. W. 
973. In this case it appeared that after the loss the plaintiff 
(the insured) had assigned his right to recover therefor to 
the party who had charge of the car, but a reassignment had 
been made to the plaintiff before suit was brought. This 
party was cross-examined as to these transfers, and after 
stating that the plaintiff owed him $800 at the time the trans- 
fer was made, he was asked: "What was that for?" To this 
an objection was interposed and sustained. The reason as- 
signed by counsel for its materiality was : "This witness was 
very closely associated with the disappearance of this car." 
It was held that the matter was collateral to the issue pre- 
sented and that there was no prejudicial error in the ruling 
of the court. 

Where there is at least prima facie evidence of theft, it is 
error to direct a verdict for the defendant. In an action on a 
theft policy the plaintiff proved that he, accompanied by two 
friends, drove the automobile aboard a ferryboat crossing 
the Hudson river from Englewood, N. J., to Dyckman street, 
N. Y. He placed the machine close up to the front of the 
boat, put on the emergency brake and stopped the engine. He 



THEFT INSURANCE 109 

and his friends then went into the cabin before the boat 
started. There was no other vehicle on the boat on that trip. 
Some minutes later, and when the boat was out on the river, 
they all came out and found the machine gone, the chain at 
the rear of the boat lying loose on the deck, and the gate at 
the rear half way open. It was held that these facts were 
prima facie proof of theft, and a directed verdict for the de- 
fendant was reversed and a new trial granted. Chepakoff 
v. National Ben Franklin Fire Ins. Co. (1916) 97 Misc. (N. Y.) 
320, 161 N. Y. Supp. 283 

See as to proof of conversion Buxton v. International 
Indemnity Co. (1920)— Cal. App.— 191 Pac. 84, Supra. §93. 

§100. Cars Recovered After Theft. — This type of insurance 
being indemnity insurance, the company is only required to 
make the insured whole in case of loss under the policy 
rather than pay the face of the policy, and where the car 
has been recovered the plaintiff must receive it back on 
payment by the company of all damages caused by the theft, 
if offered prior to the time stipulated for payment of the 
loss. Kansas City Royal Auto Co. v. Old Colony Ins. Co., 
(1917) 196 Mo. App. 225, 195 S. W. 579 ; Callahan v. London "& 
Lancashire Fire Ins. Co., (1917) 98 Misc. (N. Y.) 589, 163 
N. Y. Supp 322. 

But an insurer does not discharge its obligation by notify- 
ing the insured owner of a car stolen in Kansas City that 
the car is in a garage at Peoria, 111., and offering to turn over 
the car to the owner there and, in addition, to pay all dam- 
ages caused by the theft. Plaintiff is thus without knowledge 
of the damages to the car, of what liens may have been 
created against it since the theft, the exact cost of returning 
it to Kansas City, or the time that would be lost in having 
it returned. The car need not be returned to the exact spot 
where it was stolen, but it should be brought to a place in 
the city where it was stolen where the owner may con- 
veniently receive it. The return of the car to the city where 
it was stolen may be waived by the owner. Such waiver 



110 AUTOMOBILE INSURANCE LAW 

must be shown by clear and distinct evidence. Kansas City- 
Royal Auto Co. v. Old Colony Ins. Co., (1917) 196 Mo. App. 
255, 195 S. W. 579 

A theft policy gave the insurance company 30 days after 
proof of loss in which to make payment. Before the expi- 
ration of the 30-day period the insurer and insured adjusted 
the loss, the company drawing a draft for the amount and de- 
livering it to the insured. Next day it stopped payment, on 
information that the car had been found. It was held that 
the transaction did not amount to an account stated so as 
to permit of an independent action thereon. The court said: 

"No rights of third persons intervened and the defendants 
had the right, when the automobile was found, being prior 
to the expiration of the 30 days, to stop payment of the 
draft. It stands to reason that if the stolen property is 
found before the defendants are in default of their liability 
to pay for it, they should not be bound unless some new 
binding contract has arisen between the parties. In 'the 
absence of evidence to the contrary, and as a practical matter, 
we must assume that the parties to the adjustment and the 
draft acted with the understanding that if the automobile 
was found before the draft was paid, the liability for in- 
demnity then automatically ceased." Frost v. Heath, (1918) 
211 111. App. 454. 

In an action on a theft policy it was held that the con- 
tention of the insurance company that it conclusively ap- 
peared that there was no abandonment of the automobile 
to the company was not sustained by the evidence (not de- 
tailed in the opinion) ; that in the view most favorable to 
the company it was a qustion of fact which the company 
did not ask to have submitted to the jury. Foote, J., dis- 
sented upon the ground that up to the time the stolen car 
was found and recovered, the insured had not abandoned the 
car to the company, but was entitled to claim the car as 
his property had he deemed it for his interest so to do ; if he 
had this right, then the company had an equal right to 
restore the car to the insured. More v. Continental In- 



THEFT INSURANCE 111 

surance Co., (1915) 169 App. Div. 914, affirmed 222 N. Y. 607; 
Radice v. National Fire Insurance Co., (1920) 190 App. Div. 
893, following, / without opinion, More v. Continental In- 
surance Co., supra. 

In an action on a theft policy, evidence that the insured 
purchased a new automobile shortly after the theft was heTd 
not relevant to the issue. O'Connor v. Maryland Insurance 
Co. (1919) 287 111. 204, 122 N. E. 489 

§101. Time Within Which Recovered Car Must be Taken 
Back. — The owner of an automobile insured it against theft 
for one year from March 31, 1916, through an agent of the 
insurance company. On Sunday evening, September 10, 1916, 
he left the car at the corner of La Salle and Randolph streets, 
in Chicago, while he went to a near by restaurant, asking a 
street railway employee to watch it. A few minutes there- 
after a young man jumped into the car, unlocked it and drove 
away. The next day the insured went to the insurance com- 
pany's agent's office and reported his loss and also sent a 
letter detailing the circumstances. About five days after- 
wards the insured bought a new car, giving his note there- 
for and assigning the policy to the company from which he 
bought the automobile as collateral security for the note. On 
November 15, 1916, the Chicago police department notified 
the insured that they had recovered the stolen car, and he 
accompanied a police officer to a down-town garage, where 
he identified it as the car which had been stolen from him. 
He refused, however, to take it, on the ground that he was 
entitled to the insurance money under the policy and that the 
car belonged to the insurance company, and he wrote the 
company to that effect, stating that he intended to use the 
money from the policy to pay off the note given for the new 
car. The company refused to pay the policy, on the ground 
that the car had been recovered, and that the insured could 
have it if he desired. The insured brought suit for a recovery 
under the policy on February 21, 1917. The car was insured 
for an amount not exceeding $1,375 against loss by fire, and 
also "against loss or damage by theft or robbery by any per- 



112 AUTOMOBILE INSURANCE LAW 

son or persons other than those in the employment, service 
or household of the insured." The policy provided that the 
company, in case of loss or damage, should be liable only for 
the actual cost of repairing or replacement with the addition 
of the words "but there can be no abandonment to this com- 
pany of the property described" and providing also for notice 
and protection fro t m further loss or damage by the insured. 
The last provision of the policy, particularly necessary to be 
considered in connection with the case, read as follows : "The 
sum for which this company is liable pursuant to this policy 
shall be payable sixty days after the notice, ascertainment, 
estimate and satisfactory proof of the loss herein required 
have been received by this company." The Chicago Munici- 
pal Court directed a verdict in the insured's favor for $1,375 
and costs. 

On account of the importance of the questions involved 
the Illinois Appellate Court, after affirming the judgment for 
the insured, certified the case to the Illinois Supreme Court, 
which affirmed the Appellate Court's judgment for the fol- 
lowing reasons: "There can be no question that on prin- 
ciple the iheft of an automobile insured against theft and 
subsequently recovered presents a case somewhat analogous 
to the capture of an insured ship in time of war which is 
subsequently recovered from the enemy and restored to the 
owner." 

"Abandonment, in its technical sense, means the relinquish- 
ment of a right ; the giving up of something to which one is 
entitled; the giving up of a thing absolutely, without ref- 
erence to any particular person or purpose. In maritime law 
it mean:: relinquishment to the underwriters of all claim. 
Time is not an essential element of abandonment. The mo- 
ment the intention to abandon and the relinquishment of 
possession unite the abandonment is complete. Abandon- 
ment is not necessary when the loss is actually total, nor can 
the abandonment be made unless the loss is constructively 
total. It is never obligatory upon the insured but operates 
only as a voluntary transfer of title." 



THEFT INSURANCE 113 

It was held to be manifest from the provisions of the policy 
above mentioned that it was intended there should not be any 
voluntary abandonment by the insured to the company, using 
that word in its technical sense, but it was also considered 
apparent from leading and construing the provisions of the 
policy together that it was intended that there could be no 
recovery for a total loss of the automobile if the insurance 
company desired to replace the property on giving, in ac- 
cordance with the terms fixed by the policy, the required 
notice. The policy also provided that the sum for which the 
company was liable should be payable in sixty days after 
notice and satisfactory proof of the loss. While there could 
be no question that the liability of the company might be 
affected by the return of the automobile and the giving of the 
required notice before the expiration of the sixty days, the 
court was disposed to hold that if, after the notice and sat- 
isfactory proof of loss were given, sixty days had expired 
before the finding and return of the automobile, the policy 
intended that there might be full recovery from the com- 
pany for the value of the automobile, and this without ref- 
erence to the question of abandonment. As the court con- 
strued this policy as to loss by theft, the term "abandon- 
ment," as used in the quoted provision, was intended to mean 
that there could be no voluntary abandonment (using the 
word in the technical sense) by the owner before the expira- 
tion of the sixty days. 

"This suit was instituted after the lapse of sixty days 
from the notice and proof of loss, but after the automobile 
had been found. Counsel for appellant, (the insurance com- 
pany), seem to concede that if the suit had been instituted 
before the automobile had been found, under the reasoning of 
the English cases, the insured could have recovered for the 
full amount of the machine, — that is, that the date of the 
starting of the suit fixed the time of recovery for a total loss 
if the machine had not been found before that date. Obvious-* 
ly, in order to make an insurance policy of this kind of value 
to the owner of the property there must be some time fixed 



114 AUTOMOBILE INSURANCE LAW 

after which the return of the automobile will not release the 
company from liability. Automobiles are so generally used 
in business affairs and other activities of life that public 
policy requires that a person having a theft policy should 
not be compelled to wait indefinitely on the chance of having 
the stolen automobile recovered or be compelled to incur 
the expense of buying a new one and thereafter taking the 
old one back if recovered. Fairly construed, we think, this 
insurance policy intended to fix the date at sixty days after 
the notice and satisfactory proof of loss had been received by 
the company, — in other words, to fix the date at which the 
insured would not be compelled to take the stolen car back, 
even if recovered, at the date when the insurance money was 
agreed to be paid." O'Connor v. Maryland Motor Insurance 
Co., (1919) 287 111, 204, 122 N. E. 489. 

§102. Extent of Loss by Theft. — The proper construction 
of a policy insuring against damages directly resulting from 
theft, robbery or pilferage is that "it covers all damages result- 
ing, or which, in the contemplation of the parties, might re- 
sult, from theft, which would include damages caused by 
reckless driving or handling of the car and storage of the 
same, or any use which destroyed its value in whole or in 
part. If, following the theft, the car should be recovered 
intact, in the same condition it was before the theft, the 
plaintiff's only damage would be expenses incurred in re- 
covering the car, and, perhaps, in addition, the value of its 
use during the period between the theft and the recovery of 
the car. If the car were damaged or destroyed while in the 
custody of the thief, the plaintiff's damage would include also 
the diminution or loss of value of the car thus stolen." If 
the car should be wrecked by collision after the theft and 
totally destroyed, the defendant would be liable for its value. 
Callahan v. London and Lancashire Fire Ins. Co. (1917) 98 
Misc. (N. Y.) 589, 163, N. Y. Supp. 322. 

A policy "against loss or damage if amounting to $25 or 
more on any single occasion by theft, robbery or pilferage" 



THEFT INSURANCE 115 

provided in another part of the policy that " in the event of 
loss or damage under this policy, this company shall be liable 
only for the actual cost of repairing, or, if necessary, re- 
placing the parts damaged or destroyed." It is held that, 
notwithstanding the latter clause, diminution in the value 
of an automobile stolen and abandoned in a damaged condi- 
tion is within the policy. Federal Insurance Co. v. Hiter, 
(1915) 164 Ky., 743, 176 S. W. 210. 

Under a theft policy expressly providing that any act of 
the insured in recovering, saving and preserving the property, 
in case of loss or damage, shall be "considered as done for 
the benefit of all concerned, * * * and all reasonable expenses 
thus incurred shall constitute a claim under this policy" an 
insured may recover the amount paid a detective agency in 
attempting to recover the automobile after its theft. Buxton v. 
International Indemnity Co. (1920)— Cal. App.— 191 Pac. 84. 

Under a policy protecting a dealer's equity in automobiles 
sold under conditional contract and converted by the condi- 
tional vendee, an insured was held entitled to recover the 
amount of the unpaid installments, plus interest thereon, 
the conditional contract providing for payment of interest 
on all deferred payments from the date of contract. Buxton 
v. International Indemnity Co. (1920)— Cal. App.— 191 Pac. 84. 

§103. Unauthorized Change in Contract. — An application 
for a theft policy with a mutual insurance association was 
made when the association was insuring cars against theft 
throughout the state of Nebraska, ( including the city of 
Omaha, but between that date and the issuance of the policy 
it adopted an amendment to its by-laws, declaring that "theft 
insurance under any policy shall stand suspended and the 
association will pay no theft loss when the car is left standing 
unattended on the streets, in the parks or other public places 
in any of the following towns." including in the list Omaha. 
In writing up the policy, the association, without notice to 
the applicant and without authority from him included this 
provision in the alleged copy of the application. The applica- 



116 AUTOMOBILE INSURANCE LAW 

tion, providing for insurance for one year from January 8, 
1918, was approved by the secretary of the association January 
14, 1918. Some days later the association issued its policy to 
the applicant and sent it to their local agent, who held it for 
the applicant until after the loss of the car by theft in Omaha 
on January 24, 1918. The loss was duly reported to the 
company, which repudiated liability, relying on the quoted 
exemption and a provision in the application that the ap- 
plicant agreed to be "governed by the articles of incorporation 
and by-laws now in force or hereafter made by the associa- 
tion." It was held, in an action on the policy, that this pro- 
vision did not authorize the association to insert in the copy of 
the application embodied in the policy the quoted clause not 
contained in the original application without the insured's 
knowledge ; the provision giving the association no authority 
to make any essential changes in the contract obligation dur- 
ing the life of the policy. Johnson v. Home Mut. Ins. Assn., 
(1921)— Iowa— 181 N. W. 244. 



CHAPTER XIII 

Collision Insurance 

§104. In General. 

§105. Distinction Between Collision and Accident Policy. 

§106. Collision "With Any Object." 

§107. Upsets Excluded. 

§108. Collision With Roadbed Excluded. 

§109. Fall of Automobile Into Elevator Shaft Covered. 

§110. Fall of Floor on Automobile Not Covered. 

§111. Fall of Steam Shovel on Autotruck Covered. 

§112. Violation of Law by Insured. 

§104. In General. — Until the advent of the automobile, in- 
surance against collision was practically, if not wholly, con- 
fined to marine insurance. There are many decisions in that 
branch of insurance law determining when vessels are in 
collision, and these are sometimes cited in automobile in- 
surance collision cases. But the marine insurance holdings 
are far from uniform; and, so far, the same may be said of 
the rapidly growing number of automobile insurance collision 
cases. Universal Service Co. v. American Insurance Co. of 
Newark, N. J. (1921)— Mich.— 181 N. W. 1007. 

§105. Distinction Between Collision and Accident Policy. 

— A collision policy is not necessarily an accident policy, at 
least if it is not expressly so stated in the policy. A collision 
policy in the ordinary terms contained no reference to acci- 
dents. In an action on the policy it was held prejudicial for 
the trial court to instruct the jury "that if you shall find and be- 
lieve from the evidence that the defendant did insure plaintiff 
herein against the loss or damage by accident as alleged in 
petition filed in this case, and plaintiff sustained such loss 
or damage by accident as alleged in said petition, during the 
life of said policy of insurance, then your verdict must be for 
the plaintiff." "It will be noted," the court said, "that the 

117 



118 AUTOMOBILE INSURANCE LAW 

policy did not insure plaintiff against loss or damage by 
accident, and that something more was necessary to entitle 
plaintiff to recover other than his merely sustaining a loss 
or damage by accident, namely, it was necessary that the 
damage be sustained by being in collision with another auto- 
mobile, vehicle or object. The owner of an automobile in- 
sured by a policy of this character may suffer damage by 
accident in a great many ways that cannot constitute damage 
by collision, and which would not entitle him to recovery. 
The instruction purports to cov^r the entire case, and to 
direct a verdict, and that therefore said error is prejudicial, 
and could not be cured by other instructions given, needs no 
citation of authorities." Rouse v. St. Paul Fire & Marine 
Insurance Co. (1920)— Mo. App.— 219 S. W. 688. 

§106. Collision "With Any Object."— The courts have 
found considerable difficulty in the construction of the words 
"with any object" in collision policies, and references to this 
phrase will be found, not only in this section, but in the cases 
in the immediately succeeding sections. 

Injury caused by running one of the wheels of the car into 
a hole six or seven inches deep and eighteen inches wide 
between the car tracks on a city street is not within the 
meaning of a policy insuring against damages from "collision 
with any object." Dougherty v. Insurance Company of North 
America (1910) 19 Pa. Dist. 547, 38. Pa. Co. Ct. 119. 

The burden is upon the plaintiff to prove a collision with- 
in the terms of the policy. 

An automobile insured against injury resulting from col- 
lision with some "object, either moving or stationary," was 
injured while running along a road in New Jersey. The side 
of the road sloped from the edge of the macadam roadbed 
at an angle of 30 to 45 degrees into a deep ditch. At a turn 
in the road the machine met a horse and wagon approaching 
from an opposite direction. The automobile turned out of the 
road upon the side of the ditch, the hind wheels skidding on 
the turn, thus throwing the rear of the machine further into 
the ditch than the front wheels. In attempting to regain 



COLLISION INSURANCE 1 19 

the road the right hand front wheel collapsed and the 
automobile turned over twice, and was seriously damaged. 
In an action on the policy proof was given of the above facts, 
and the trial court inferred that there must have been a col- 
lision. There was no evidence given of the existence of any ob- 
ject with which the automobile did or could have come into 
collision. On appeal the court said that if it were to speculate 
upon the causes of the injury to the car, the facts pointed 
more strongly to the collapse of the wheel from strain than 
from collision. It was shown that the earth was soft on the 
side of the ditch, and the wheels that left the road sank three 
or four inches into the earth. The spokes of the right front 
wheel were all broken off at the hub. The tire was intact. 
As the machine was tipped to the right by the slope of the 
bank, the weight would largely rest upon that wheel.. The 
skidding of the rear wheels would place a great strain 
upon the right front wheel, sunk three or four inches in dirt. 
The condition of the front wheel would seem to negative the 
theory of collision. Could the tire withstand a blow so 
violent as to break every spoke on the wheel? The trial 
court should not have speculated on the cause of the collapse 
of the wheel. That should have been proved. Hardenbergh 
v. Employers' Liability Assur. Corp., Ltd., (1913) 80 Misc. 
(N. Y.) 522, 141 N. Y. Supp. 502, reversing Hardenbergh v. 
Same, 78 Misc. (N. Y.) 105, 138 N. Y. Supp. 662. 

In an action on a policy* insuring automobiles against loss 
from damage "resulting from the collisions of said auto- 
mobiles with any other automobile, vehicle or object, ex- 
cluding * * * damage resulting from collisions due wholly or 
in part to upset," the insured claimed that the automobile 
was injured by a collision with a "brick, stone or other solid 
substance." The insurance company contended that to con- 
stitute a collision both objects must be in motion, and cited 
several marine insurance cases holding this to be the mean- 
ing of the word. It was held that the word "collision" was 
not to be limited to cases where both colliding objects were 



120 AUTOMOBILE INSURANCE LAW 

in motion. Lepman v. Employers Liability Assurance Corp., 
Ltd, (1912) 170 111, App. 379. The court said. "If it had been 
the understanding of the insurer that its liability would be 
limited to those cases where there was a striking of the 
automobile and a moving object, the word 'moving' would 
doubtless have been placed before the word 'object/ " 

In a case in the Illinois Appellate Court, not fully reported, 
a judgment for the plaintiff was reversed where the evidence 
showed that the insured automobile was not, as alleged, at 
the time in question in collision with any post or any other 
stationary object. Cantwell v. General Accident Fire & Life 
Assur. Corp. (1917) 205 111. App. 335. 

§107. Upsets Excluded. — In an action on a policy insuring 
an automobile "from collision with any moving or stationary 
object; excluding however * * * (c.) damage resulting from 
collision due wholly or in part to upsets," it appeared that the 
automobile ran off a highway bridge, crashing through the 
guard rail, was precipitated into the stream below, turned up- 
side down after leaving the bridge and rested in an inverted 
position on the bed of the stream. The trial court directed a 
verdict for the defendant. On appeal it was held that the 
plaintiff was entitled to damages unless, within the meaning 
of the policy, the moving or stationary object must be per- 
pendicular instead of horizontal. There were no words in 
the policy limiting the meaning of the object to a per- 
pendicular one. It was held that the liability seemed to be 
within the express terms t of the policy. But, assuming that 
there was such ambiguity in the terms of the policy as would 
make it at least doubtful as to whether collision with water 
and land, horizontal objects, was within the 'terms of the 
policy, the words used in the policy would be interpreted 
most strongly against the insurer where the policy was so 
framed as to leave room for two constructions. 

On the question of upset, the court said that it could not 
be said that the collision of the automobile with the water 
and land under the water was caused by an upset. "It may 



COLLISION INSURANCE 121 

be that the car upset by reason of contact with the water or 
the earth, but the collision was not due to an upset — the upset 
may have been the result of the collision. The provision in 
the policy cannot mean that where collision has first taken 
place, there can tie no recovery because, as the result of the 
collision, the machine is upset. When the car ran off the 
bridge, dynamic force and gravitation determined the posi- 
tion in which it would strike first the water and then the bed 
of the stream. Its final position was merely incidental to 
the collision." Judgment for the defendant was therefore 
reversed and a new trial ordered. Harris {v. |American 
Casualty Co. of Reading, Pa., (1912) "83 N. J. L. 641. 

An automobile was insured against loss "by being in col- 
lision during the period insured with any other automobile, 
vehicle or object, excluding * * * dam&ge caused by striking 
any portion of the roadbed or by striking the rails or ties 
of street, steam or electric railroads." While the automobile 
was being used by an agent of the insured for pleasure riding 
at night, the agent by accident ran it off the main road and 
down a bank of three or four feet into a river, damaging the 
car. It was held that the accident was not within the policy, 
was "so obviously outside of the quoted stipulation of the 
policy that discussion seems superfluous. In order to bring 
the case within the policy there must have been, first, a 
collision; second, the collision must have been with another 
automobile, vehicle, or somewhat similar object, ejusdem 
generis; and third, it must not have been with any portion of 
the roadbed, meaning the ground on which the machine was 
running or attempting to run. No such collision was shown 
as that insured against." Wettengel v. United States "Lloyds" 
(1914) 157 Wis. 433, 147 N. W. 360. The court distinguished 
the case of Harris v. American Casualty Co., 83 N. J. Law, 
641, supra, where the policy was different, adding that it was 
disposed to doubt the soundness of that decision even upon 
the different contract there in question. In the later case 
of Bell v. American Issurance Co. (1921) Wis. 181 N. W. 
733, the Wisconsin Supreme Court said, referring to the 



122 AUTOMOBILE INSURANCE LAW 

Wettengel case: "A further consideration of the subject 
does not remove the doubts there expressed." 

In Bell v. American Insurance Co. >supra, it is held that the 
striking of the ground, resulting from one side of the car 
settling into the ground and the car tipping over, is not a 
collision within the meaning of such a policy. An insured 
was driving his automobile down a street and turned on an 
avenue with the intention of backing out and turning arouncl. 
He had crossed the cross-walk by six or eight feet, practically 
stopped his car, the power being in neutral, preparatory to 
backing out. One side of the car gradually settled into the 
ground and the car tipped over. The insured sued the com- 
pany to recover the damage to the car by its coming into 
contact with the ground at the time of the upset. Bell v. 
American Insurance Co., (1921)— Wis.— 181 N. W. 733. The 
court said: "With the definitions of lexicographers as a 
basis, it is easy to demonstrate that the incident resulting 
in damage to plaintiff's automobile constituted a collision. 
Thus: 

"A collision is the meeting and mutual striking or dashing 
of two or more moving bodies or of a moving body with a 
stationary one." Century Dictionary. "Object" is defined 
to be "that which is put, or which may be regarded as put, 
in the way of some of the senses, something .yisible or 
tangible." Webster's Dictionary. An automobile is an object. 
Upon the overturning of an automobile its forcible contact 
with the earth constitutes a "mutual striking or dashing of 
a moving body with a stationary one." Hence the forcible 
contact of the automobile with the earth on the occasion 
of the upset constituted a collision.' 

"Upon its face this appears to be good logic, but the con- 
clusion is neither convincing nor satisfying. One instinctively 
withholds assent to the result. The reason is that it makes 
a novel and unusual use and application of the word 'collision.' 
We do not speak of falling bodies as colliding with the 
earth. In common parlance the apple falls to the ground; 
it does not collide with the earth. So with all falling bodies. 
We speak of the descent as a fall, not a collision. In popular 



COLLISION INSURANCE 123 

understanding a collision does not result, we think, from the 
force of gravity alone. Such an application of the term 
lacks the support of 'widespread and frequent usage.' " 

"The incident causing the damage to the automobile here 
in question is spoken of in common parlance as an upset or 
tip-over. If it were the purpose to insure against damage 
resulting from such an incident, why should not such words, 
or words of similar import, have been used? We cannot 
presume that the parties to the contract intended that an 
upset should be construed as a collision in the absence of a 
closer association of the two incidents in popular under- 
standing." 

Under a policy expressly covering damage to the auto- 
mobile "if caused solely by collision with another object, 
either moving or stationary" and excluding all damage caused 
by upset unless such upset is a direct result of such a collision, 
there is no recovery for damage to a car which, in coming 
down a steep grade at a high rate of speed, got out of the 
road on a sharp turn and upset on the brink of a hill without 
colliding with anything and rolled down the hill and there 
collided with a tree. Stuht v. United States Fidelity and 
Guaranty Co., (1916) 89 Wash. 93, 154 Pac. 137. 

§108. Collision with Roadbed Excluded. — A collision 
policy covered damage to the car by being "in collision with 
any other automobile, vehicle or object * * * excluding 
damages caused by striking any portion of the roadbed." 

The word "object" as used here does not, it is held, mean 
"some object similar to an automobile or vehicle," within 
the ejusdem generis rule, but must be construed in the 
ordinary acceptance of the word to imply that which is 
tangible or visible. Under this definition it was held that 
an embankment outside the traveled road which the car hit 
after it had skidded and overturned and was rolling into the 
ditch at the roadside was within the policy. The court re- 
fused to consider the embankment part of the roadbed, and 
so excepted by the policy, holding that the term "roadbed" 
applies only to that portion of the road which was constructed 



124 AUTOMOBILE INSURANCE LAW 

and used for travel. Rouse v. St. Paul Fire & Marine Insur- 
ance Co., (1920)— Mo. App.— 219 S. W. 688. 

A policy insured against loss "by collision with another 
object, either moving or stationary, excluding, however, * * * 
all loss or damage caused by striking any portion of the 
roadbed or any impediment consequent upon the condition 
thereof/' In an action for damage by collision with the 
curbing along a street it was held that if the curbing was 
a part of the street or roadway, the plaintiff could not say 
that he had left the roadbed when he collided with the curb- 
stone. A curbing or curbstone along a street was held to be- 
both a "portion of the roadbed" and an "impediment con- 
sequent upon the condition thereof" and both of these were 
exceptions and not insured against. Gibson v. Georgia Life 
Insurance Co., (1915) 17 Ga. App. 43, 81 S. E. 335, distinguisB- 
ing Hanover v. Georgia Life Insurance Co., (1914) 141 Ga. 
389, 81 S. E. 206, where, under a similar policy, it was alleged 
that the car left the roadbed, and after crossing a ditch on 
the side of the road, collided with the bank on the further 
side of the ditch, and it was held that the petition was not 
subject to general demurrer, because, "when the plaintiff 
averred that he had left the roadbed, we do not think we can 
say, as a matter of law, that he alleged facts which shows 
that the accident fell within the exception." 

In another case, where collision with any portion of the 
roadbed was excepted, it was held that, although the gutter 
of a street is within and a part of the street or roadway with 
respect to the power of a city to construct, improve and 
maintain streets, it is not a portion of the roadbed when con- 
sidered with reference to the subject matter contemplated 
in such a policy, that the roadbed contemplated consisted of 
that portion between the gutters on either side, which was 
constructed for travel, and not to the gutters, designed for 
the purpose of draining water from the adjacent roadbed. 
At the same time, the court said that if the language was 
doubtful it was to be construed against the company. 

In any event, the automobile seems to have left the road- 



COLLISION INSURANCE 125 

bed, as it skidded on the roadway, so as to thrust the rear 
wheels across a granitoid guttering, twenty inches wide, 
and on a level with, and adjacent to the roadway, and thence 
across a grass plot adjoining, two feet wide, where they 
collided with a sidewalk, six inches above the plot, causing 
damage to the automobile. Stix v. Travelers Indemnity Co., 
(1913) 175 Mo. App. 171, 157 S. W. 870. 

§109. Fall of Automobile Into Elevator Shaft Covered. — 

A collision rider read as follows: "In consideration of $20, 
Additional Premium, this policy is hereby extended to cover 
damages to the automobile and equipment herein insured 
caused by collision with any other vehicle or with any animal 
or object, or any obstacle placed as a barrier; or in entering 
or leaving any building adjacent to any roadway. But 
nothing in this clause shall be held as making this company 
liable for damages caused by striking any portion of the 
gutter, roadbed or ditch, or by striking street or steam rail- 
road rails or ties, or by upset unless the upset be caused by 
such a collision as is insured against hereunder; or for loss 
or damage by detention or loss of use." 

An automobile insured under the foregoing rider was being 
taken by the chauffeur into a garage for the purpose of 
having some repairs made. The chauffeur took the car 
inside the building a distance of thirty to thirty-five feet 
from the entrance, when he stopped to speak to the foreman. 
The car was closed and it was somewhat dark. Intending to 
go to the second story, he backed the car into the open area 
of an elevator shaft and the car fell to the ground below. 
The insurance company's defense to an action on the policy 
was that the accident was not the result of a collision, and that 
it occurred inside of a building. It was held that there was 
a collision, as it could not be urged that when a body is hurled 
through the air and it hits the earth "striking" is not 
the accepted word to designate the contact, and "striking" 
was the defendant's own definition of the word "collision." 



126 AUTOMOBILE INSURANCE LAW 

Regarding the meaning to be attributed to the phrase "on 
entering or leaving any building" it was held to be a fair 
interpretation of the rider and the policy that the insurer 
was liable for striking an object without regard to the place 
where it might occur and it was liable for any damage to 
the automobile on entering or leaving the building from 
accidents not caused by collision. 

Should there be any doubt about the meaning of the 
language of the rider, the court would interpret it most 
strongly in favor of the insured and hold the insurer liable. 
Wetherill v. Williamsburgh City Fire Ins. Co., (1915) 60 
Pennsylvania Superior Ct. 37. 

§110. Fall of Floor on Automobile Not Covered* — A policy 
insured a car against damage by collision "with any other 
automobile, vehicle or object, excluding * * * damage caused 
by striking" roabed, rails or ties. While the car was in a 
garage, the second floor of the building fell upon it. It was 
held that the resulting damage was not caused by '^collision."" 
Such a construction of the policy would be a forced one and 
clearly not within the intention of either party to the policy. 
O'Leary v. St. Paul Fire and Marine Ins. Co., (1917) Tex. 
Civ. App. 196 S. W. 575. 

§111. Fall of Steam Shovel on Autotruck Covered. — In an 

action by the seller and purchaser in a conditional sale contract 
of an autotruck against an insurance company on a policy 
in which, according to the parties' agreed statement of facts, 
there was "full coverage collision'' insurance, it appeared 
that the truck was loaded by means of a steam shovel ; that 
is, by a scoop connected with and swinging from the arm of 
a derrick. The scoop was filled with crushed stone, lifted by 
the derrick arm, swung over the truck, lowered to the 
proper position, and opened to allow the stone to fall into 
the truck body. At the time of the accident, the loaded scoop, 
while over and above the truck, fell from some unexplained 
reason upon the truck, causing damage to the truck in the 
agreed sum of $483.45. 



COLLISION INSURANCE 127 

As stated by the court the question involved was : Did 
the fact that the truck was struck by an object coming from 
above it, instead of on a level with it, remove the accident 
from the field of '"collision," and relieve the defendant from 
liability? The Michigan Supreme Court answered the ques- 
tion in the negative, saying in part: 

"Most collisions occur in the violent impact of two bodies 
on the same plane or level, and it is undoubtedly true that 
the word is more frequently used to express such impacts 
than other violent impacts. But we doubt that this fact has 
given to the word such a common understanding of its mean- 
ing as to exclude violent impacts unless upon the same plane 
or level. If one machine was going up and another going 
down a steep hill, and they came violently together, no one 
would hesitate for a moment in using the word 'collision', 
At what angle must the impact occur to make the use of the 
word 'collision' inappropriate and relieve the insurance com- 
pany from liability? We are persuaded that the better rule, 
the safe rule, is to treat and consider the word as having the 
meaning given it uniformly by the lexicographers ; that where 
there is a striking together, a violent contact or meeting of 
two bodies, there is a collision between them, and that the 
angle from which the impact occurs is unimportant. In the 
instant case there was the violent striking together of the 
truck and the heavily laden scoop ; this was a collision within 
the meaning of the policy and rendered the defendant liable." 
Universal Service Co. v. American Insurance Co. of TMewark, 
N. J. (1921)— Mich.— 181 N. W. 1007. The court adverted to 
the contrary conclusion reached by the Wisconsin Supreme 
Court in Bell v. American Insurance Co., (1921) — Wis. — 181 
N. W. 733, (see supra §107). 

§112. Violation of Law by Insured. — Action was brought 
on a policy which covered loss by collision when the auto- 
mobile was being used for "pleasure and business calls." 
The car was destroyed while attempting to cross railroad 
tracks by being overturned on the tracks and then struck by 



128 AUTOMOBILE INSURANCE LAW 

a freight train. At the time the insured was carrying through 
dry territory a considerable quantity of intoxicating liquor, 
which the insurance company claimed he intended to dispose 
of illegally in dry territory ; but though the circumstances 
were suspicious, there was no direct proof of this. It was 
held that the use the plaintiff was making of his machine 
was within the terms of the policy, the company having 
chosen no more definite statement of the use in which 
liability should accrue for injury by a collision. Cohen v. 
Chicago Bonding & Insurance Co., (1920)— Minn.— 178 N. W. 
485. 



CHAPTER XIV 

Transportation Insurance 

§113. "Stranding or Sinking." 
§114. "Derailment." 

§113. "Stranding or Sinking." — A policy for one year cov- 
ered loss from "stranding or sinking of any conveyance, by 
land or water, in or upon which such automobile is being 
transported," provided the car was not used "beyond the 
limits of the United States, Canada and Mexico, or between 
ports within said limits." 

The automobile was damaged from being submerged in 
salt water as the result of the sinking of a ferry upon which 
the insured had driven it for transportation across Goose 
Creek, in Harris County, Tex. In an action on the policy 
one of the defenses was that the policy carried an implied 
warranty on the part of the insured of the seaworthiness 
of the ferry for the use he attempted to make of it, which 
obligation had been breached. The court held that this 
defense was not available, because not applicable to the kind 
of insurance here involved, and that the ordinary policy of 
automobile accident insurance, like the one here sued upon, 
is not of the character of a strictly marine insurance policy. 
The court said : "The nature of the risk is essentially different 
from that applying to hazards of the sea, if for no other 
reason, in that the subject of it, the automobile, was itself 
contemplated to be used as a means of conveyance, in refer- 
ence to which no such condition as seaworthiness, or the lack 
of it, could have been thought of. Consequently the inci- 
dents of an undertaking to provide against 'the perils of the 
sea', or other hazards to which a seagoing vessel or a cargo 
carried in one, may become subject, do not attach. The 

129 



130 AUTOMOBILE INSURANCE LAW 

parties here by plain stipulations made another kind ',of 
contract." American Automobile Insurance Co. v. Fr*x (Tex. 
Civ. App. 1919) 218 S. W. 92. 

It is the sinking of the ferry or other conveyance, not of 
«the car itself, which is insured against. 

A policy over an automobile contained the following en- 
dorsement : "In consideration of $28.05 premium * * * it is 
hereby understood and agreed that this policy is extended 
to cover the insured to an amount not exceeding $1,700 on 
the body, machinery and equipment while within the limits 
of the Dominion of Canada and the United States, including 
while in building, on road, on railroad car or other convey- 
ance, ferry or inland steamer, or coastwise steamer between 
ports within said limits subject to the conditions before men- 
tioned and as follows : (A) Fire, arising from any cause what- 
soever, and lightning. (B) While being transported in any 
conveyance by land or water — stranding, sinking, collision 
burning or derailment of such conveyance, including general 
average and salvage charges for which the insured is equally 
liable. (C) Theft, robbery or pilferage, excepting * * *." 

The car was being taken from the mainland to an island 
on a ferry operated by a chain. When the ferry reached the 
island, the driver was told it was all right to go ahead and 
he proceeded to drive the car off the ferry. After the front 
wheels had reached the land, the ferry began to move away, 
with the result that the car dropped into the water. The 
owner sued the insurance company for the cost of raising the 
car and of the repairs and new parts. It was held that the 
damage was not covered by the policy, the loss not having 
been caused by the stranding, sinking or collision or burning 
of the ferry boat. 

The court said: "Clauses (A) (B) and (C) are intended, in 
my judgment, to define the three kinds of risk assumed by 
the insurers. (A) covering fire, that is, fire destroying or 
damaging the car itself, and lightning; (B) covering loss 
while being transported in any conveyance by land or water ; 
and (C) covering 'theft/ 'robbery/ and 'pilferage/ It must 



TRANSPORTATION INSURANCE 131 

be observed that in clauses (A) and (C) the nature of the 
risk is definitely described by nouns, namely, 'fire/ 'lightning,' 
'theft/ 'robbery/ and 'pilferage.' The corresponding words in 
clause (B) are 'stranding/ 'sinking,' 'collision/ 'burning', and 
'derailment.' And the risk which the policy assumes is the 
stranding, sinking, collision, burning, or derailment of the 
conveyance containing the motor-car while being transported 
by land or water. It is not the stranding, sinking, etc., of the 
motor car itself which is covered, but of the conveyance ; and 
any damage to the motor car resulting from any such accident 
to the conveyance would be covered by the policy. The open- 
ing words of the clause are to be interpreted solely as mark- 
ing the occasion upon which any of the specified accidents 
to the conveyance will entitle the insured to recover." Wamp- 
ler v. British Empire Underwriters Agency, (1920) 54 Domin- 
ion L. R. 657. 

§114. "Derailment."— An action of contract was brought 
upon a transportation certificate of insurance, on the margin 
of which was printed: "This insurance is only against loss or 
damage by fire, collision or derailment on land, and marine 
perils while on ferries and transfers." In the body of the cer- 
tificate the following appeared: "Shipped by auto truck at and 
from Medford, Mass., to destination East Princeton, Mass., 
covering only while in transit by land." 

While the property was in course of transportation by auto 
truck the wheels of the truck skidded into the gutter, caus- 
ing the truck to tip and capsize. The amount of damage for 
which the plaintiff would be entitled to recover, if the in- 
surance company was liable at all under the certificate, was 
agreed upon by the parties. 

As the accident was not caused by fire or by collision the 
sole question presented was whether the damage was caused 
by a "derailment" as meant by the certificate. "Derailment" is 
defined by Webster's International Dictionary as "the act 
of going off, or the state of being off, the rails of a railroad." 

It was held that the word was to be interpreted according 
to the general and ordinary acceptation of the language used 



132 AUTOMOBILE INSURANCE LAW 

in the absence of evidence that it has acquired by custom or 
otherwise a peculiar meaning distinct from the popular sense 
of the word. It is to be understood as conveying the usual 
meaning of the word as commonly accepted. It is plain that 
"derailment" is used only in connection with transportation 
by rail as distinguished from transportation by vehicles over 
land by means other than by rail, and as distinguished from 
transp9rtation by water. 

It was held that the language of the certificate was clear 
and free from ambiguity, and the parties must be bound by 
the agreement which they had entered into, in the absence of 
fraud or some other legal reason justifying a repudiation of 
the contract. The skidding of the hind wheels of the truck 
into the gutter, causing it to capsize when it was being op- 
erated on a public highway, was therefore found not to be 
"derailment," and the insurance company was not liable under 
the certificate. Graham v. Insurance Co. of North America 
(1915) 220 Mass. 230, 107 N. E. 915. 



CHAPTER XV 

Indemnity Insurance 

§115. In General. 

§116. Right to Issue Indemnity Insurance. 

§117. Criminal Prosecutions Not Insured Against. 

§118. Use of Car by Another Than Owner or His Servant. 

§119. Use of Car by Member of Owner's Family. 

§120. Indemnity Policies Insuring Partnerships. 

§121. Indemnity Policies Insuring Partners. 

§122. Exception of Cars Used for Demonstration. 

§123. Violation of Statute and Provision of Policy as to Age 

of Driver. 

§124. Violation of Speed Ordinance. 

§125. Violation of Statute As to Registration. 

§126. Actual Payment of Loss by Insured; Liability or 

Indemnity. 

§127. What Constitutes Payment of Judgment. 

§128. Condition as to Payment Prohibited by Statute. 

§129. Voluntary Payment by Insured Not Actual Payment. 

§130. Right of Person Injured to Sue Insurance Company. 

§131. "Bodily Injury" as Affecting Third Person's Right to 

Recover. 

§132. Judgment Against Insured; Garnishment. 

§133. Aid by Insured in Defense of Negligence Action. 

§134. Settlements by Insured Without Insurer's Consent. 

§135. Effect of Insurer's Refusal to Accede to Compromise. 

§136. Interference with Negotiations. 

§137. Interference in Suits. 

§138. Waiver by Insurer of Defense by Assuming Control of Suit. 

§139. Effect of Insurer's Failure to Appeal. 

§140. Insurer Cannot be Enjoined from Defending Suit Against 

Assured. 

§141. Necessity for Notice to Insurer of Accident. 

§142. Time for Notice of Accident. 

§143. Waiver of Condition as to Notice of Accident. 

§144. Amount of Recovery. 

§145, Same ; "Bond Premium Not Covered. 

§146. Same; Insured's Costs After Insurer's Failure to Defend 

Suit. 

§147. Provision Against Waiver of Conditions by Company's 

Officers. 

§148. Effect of Settlement by Insurer on Rights of Insured. 

§149. Effect of References to Insurance in Negligence Actions. 

§150. Same; Error Cannot be Cured by Instruction to Jury. 

133 



134 AUTOMOBILE INSURANCE LAW 

§151. Same; Defendant Cannot Complain if Reference First Made 
by Him. 

§115. In General. — An automobile indemnity policy, as 
usually framed, has been described as a contract where, being 
properly notified of an accident or damage covered by the 
policy, the insurance company agrees to step into the insured's 
shoes as far as handling the claim or effecting settlement or 
defending suits is concerned. Burnham v. Williams and Quinn 
(1917) 198 Mo. App. 18, 194 S. W. 751. 

An incorporated association whose business is that of in- 
demnifying its members against loss resulting from damages 
inflicted by automobiles upon the person or property of 
others is an insurance company, and by virtue of the pro- 
visions of section 51 of the Kansas Civil Code an action on 
the contract of indemnity may be brought in the county in 
which the plaintiff resides. Emerson v. Western Automobile 
Indemnity Assn, (1919) 105 Kan. 242, 182 Pac. 647. 

§116. Right to Issue Indemnity Insurance.— Indemnity or 
liability insurance differing widely from accident or property 
insurance, the question has arisen in various states as to the 
right, under the state statutes, to issue such insurance under 
the existing state statutes relating to automobile insurance. 
American Fidelity Co. v. Bleakley (1912) 157 Iowa 442, 138 
N. W. 598. 

So, in Michigan, it has been held that a statute which 
authorizes, under the heading "Fire Insurance Act," com- 
panies "to make insurance on automobiles whether stationary 
or being operated under their own power, against any hazard" 
does not authorize a company to write liability insurance, a 
contract of this kind being something more than "simply 
the placing of insurance on an automobile." American Auto- 
mobile Insurance Co. v. Commissioner of Insurance (1913) 
174 Mich. 295, 140 N. W. 557. The court said: "The language 
of the statute is not complex. Authority is given to 'make 
insurance on automobiles.' If it was an insurance on the 
automobile against fire, that would be a recognized hazard 
to which automobiles are subject. If it was an insurance on 



INDEMNITY INSURANCE 135 

the automobile against theft, that, too, would be a recognized 
hazard to which the automobile is subject. So of injury by- 
accident, and the liability in each case would not be greater 
than the value of the automobile. Is not the relator doing 
more than placing insurance on automobiles?" 

And it has been held in Iowa that a foreign insurance com- 
pany, which has complied with all the provisions of the 
statutes of Iowa relative to its admission to that state, and 
has received a license from the state auditor to do business 
within the state, and which has power by the laws of its own 
state and by its charter to insure the owner or driver of an 
automobile, who is not an employer, against liability for 
damages to persons resulting from an accident caused by the 
owner's or driver's negligence in operating his machine 
could not issue such insurance in Iowa under the statutory 
provision authorizing insurance of the health of persons "and 
against personal injuries, disablement or death resulting from 
traveling or general accidents by land or water," or the pro- 
vision authorizing employers' liability insurance. American 
Fidelity Co. v. Bleakley (1912) 157 Iowa 442, 138 N. W. 508. 

The courts have no authority to override such legislation 
on the ground of comity between the states, since, within 
its power, the state, through its legislation, is jsupreme. 
American Fidelity Co. v. Bleakley (1912) 157 Iowa 442, 138 
N. W 508. Since the policy of the state of Michigan, as evi- 
denced by statutes and decisions, is to separate insurance on 
property from other lines, the Michigan Supreme Court holds 
that the rule of comity, permitting a corporation organized 
under the laws of another state, which authorize it to trans- 
act liability and other insurance on automobiles, to engage 
in similar business in other states, does not empower it to 
engage in such distinct lines of business not permitted by the 
Michigan statutes. American Automobile Insurance Co. v. 
Commissioner of Insurance (1913) 174 Mich. 295, 140 N. W. 
557. 

§117. Criminal Prosecutions Not Insured Against. — The 

word "suit" in an indemnity policy does not comprehend 



136 AUTOMOBILE INSURANCE LAW 

criminal prosecutions. A provision in such a policy against 
loss from the liability imposed by law upon the insured on 
account of bodily injuries caused by the use of the auto- 
mobiles specified in the policy that the insurer shall defend 
any suits brought against the insured on account of such 
injuries does not cover a prosecution for manslaughter arising 
out of the negligent operation of the car. Patterson v. 
Standard Accident Ins. Co. (1913) 178 Mich. 288, 144 N. W. 
491, 51. L. R. A. (N. S.) 583, Ann. Cas. 1915 A 632. The court 
said: "It would be a forced and unnatural construction to 
hold that the word as used in this accident policy is intended 
to comprehend criminal prosecutions instituted and conducted 
by public officials in the name of the people, presumably for 
the punishment and suppression of crime * * *. Further- 
more, the two essentials of a contract of insurance which are 
to be considered together in this inquiry are the subject 
matter and the risk insured against. The two automobiles 
constitute the subject-matter in relation to which the risk 
was assumed. Construing the various provisions of the policy 
together, we think it clearly evident that the controlling 
thought as to indemnity, the thing contracted for, was pro- 
tection against risk of liability for injury resulting from 
accidents in the operation of the automobiles, not risk of 
public prosecution for crimes or misdemeanors committed in 
the use of them; and we conclude from the context that in 
this policy the word 'suits' must be taken to mean civil suits 
which would determine the pecuniary liability of defendant 
for injury to person or property; suits which, because of its 
promised indemnity, defendant was necesarily interested in 
defending." 

§118. Use of Car by Another Than Owner or His Servant. 

— In a New York case it was held that where the plaintiff was 
insured against loss "by reason of the ownership, main- 
tenance or use of" the automobile, he would require to show, 
in order to recover, that the chauffeur who drove the auto- 
mobile at the time of the accident was his servant and en- 
gaged in his business, especially in view of the insured's 



INDEMNITY INSURANCE 137 

answer in the injured person's action .denying that such 
chauffeur was the insured's servant and engaged in his busi- 
ness. All that appeared at the trial on this question was that 
the truck, which was used by the insured for delivery pur- 
poses, had been put into storage with a garage company, with 
liberty to rent it, and the garage company had sent it out, in 
charge of a chauffeur hired by it, to deliver for another com- 
pany. This was held insufficient to bring the claim within 
the terms of the policy. Mayor, Lane & Co. v. Commercial 
Casualty Co. (1915) 169 App. Div. 772, 155 N. Y. Supp. 75. 

§119. Use of Car by Member of Owner's Family. — A 

policy indemnifying the insured against claims for damages 
on account of bodily injury "accidentally suffered or alleged 
to have been suffered * * * by any person or persons by rea- 
son of the ownership, maintenance or use" of a described 
automobile, was held, in an Iowa case, not to limit the in- 
demnity to claims for damages on account of injuries oc- 
curring while the insured is personally using the car, but 
to extend to an adult son, who was a member of the family, 
where it was known and understood by the company that the 
insured did not himself drive the car, and a clause in the 
policy exempting the insurer from' liability for injuries when 
the car was being driven by anyone under sixteen years of 
age showed that the car was intended to be used as a family 
car. Fullerton v. United States Casualty Co., (1918) 184 
Iowa 219, 167 N. W. 700. 

§120. Indemnity Policies Insuring Partnerships. — An in- 
demnity policy insured Hartigan & Dwyer, a copartnership, 
composed of Maurice H. Hartigan and Joseph E. Dwyer, 
against loss by accidents caused by a described delivery auto- 
hobile. While the automobile was being used in the business 
of another copartnership, Hartigan, Dwyer & O'Brien, con- 
sisting of the same individuals as the firm of Hartigan & 
Dwyer and one John J. O'Brien, and driven by an employee 
of Hartigan, Dwyer & O'Brien, a child was run over and 
killed. Hartigan & Dwyer paid tw r o-thirds of the amount 



138 AUTOMOBILE INSURANCE LAW 

for which the claim against Hartigan, Dwyer & O'Brien 
arising out of the accident was settled and maintained suc- 
cessfully an action on the policy to recover the amount thus 
paid by them. On appeal, the question was whether the 
policy could be so construed as to bring within its terms 
such individual liability. The plaintiffs directed the court's 
attention to the trial court's findings of fact, unanimously 
affirmed by the Appellate Division, that the policy insured 
the plaintiffs "and each of them" and that at the time of the 
accident the automobile was in use "by an agent of the 
plaintiffs and one John J. O'Brien." The New York Court 
of Appeals held that the terms of the policy were unambiguous 
and limited the liability of the insurer to accidents which 
happened while the automobile was being used on the firm 
business of Hartigan & Dwyer. 

The plaintiffs succeeded in the lower courts on the theory 
that they were individually liable for the torts of the firm of 
Hartigan, Dwyer & O'Brien, but the Court of Appeals held 
that it was the firm of Hartigan & Dwyer, described in the 
policy as "department store merchant," that was insured, and 
that firm had committed no wrong and incurred no liability. 
Hartigan and Dwyer, as individual members of the firm of 
Hartigan, Dwyer & O'Brien, were not insured against liability 
for the acts of that firm. When a partnership is established, 
the liability of the individual partners is an incident of the 
partnership, merely, not a separate and independent liability. 
The policy protected Hartigan & Dwyer from loss by reason 
of automobile* accidents for which their partnership was liable 
and to that extent protected them individually as members of 
such firm ; but the one partnership as such was not a member 
of and was not liable for the torts of the other partnership. 
Hartigan v. Casualty Co. of America (1919) 227 N. Y. 175, 
124 N. E. 789, reversing 165 N. Y. Supp. 894, which affirmed 
161 N. Y. Supp. 145. The court distinguished this case from 
cases where the partnership was suing to recover for the 
loss one of its partners sustained and where a corporation was 
suing to recover the loss one of its stockholders sustained, 



INDEMNITY INSURANCE 139 

because, while a partner is individually liable for the debts of 
his firm, a partnership is not liable for the debts of the indi- 
viduals who compose it, neither is a corporation liable for the 
debts of its shareholders. (See Kelly v. London Guarantee 
& Accident Co., 97 Mo. App. 623, 71 S. W. 711 and Rock 
Springs Distilling Co. v. Employers' Indemnity Co. of Phila- 
delphia, 160 Ky. 317, 169 S, W. 730.) 

§121. Indemnity Policies Insuring Partners. — Action was 
brought by Frank Steinfield against the Massachusetts Bond- 
ing & Insurance Company on an indemnity policy against 
loss imposed on the insured Steinfield by law "by reason of 
the ownership, maintenance or use" of his automobile. The 
plaintiff was a partner in the firm of B. Steinfield's Sons, and 
used the machine in the partnership business. One of the 
partners, while driving the machine, ran into one Dean, who 
recovered a judgment against the firm, which the firm satis- 
fied. 

It was held that the question whether the insurance com- 
pany was liable for the Dean judgment did not depend on 
whether the plaintiff insured was using the machine on his 
own business when the accident happened, but on whether 
the law made him liable for Dean's loss. A partner being 
liable individually for the debts of his firm, the plaintiff was 
therefore legally liable for the judgment against the firm, so 
that the loss sustained by the plaintiff was covered by the 
policy. But as the firm of B. SteinfiekTs Sons paid the judg- 
ment and the expenses of defending the suit against it, the 
plaintiff insured could only recover in his suit against the 
insurance company the amount with which he would be 
charged because of the Dean suit on an accounting; and if 
he should succeed in his suit against the insurance company 
and the company should satisfy the judgment against it, 
the insurance company would be subrogated to his rights to 
proceed against the one who drove the machine. If the 
plaintiff, and not B. Steinfield's Sons, had paid the Dean 
judgment and the expenses incident to the suit, he could 



140 AUTOMOBILE INSURANCE LAW 

recover the amount so paid from the insurance company, 
which could maintain an action under the subrogation clause 
of the policy for an accounting against the members of B. 
Steinfield's Sons, or against the one who was driving the 
machine, if, as between the partners, he was liable for the loss 
the firm sustained by the Dean suit. Steinfield v. Massachu- 
setts Bonding & Ins. Co. (1920)— N. H.— Ill At!. 303. 

8122. Exception of Cars Used for Demonstration. — In an 

action on an automobile indemnity policy the defense was 
based on the following clause in the policy: "Condition A. 
This policy does not cover loss * * * by reason of the use or 
maintenance of any of the automobiles enumerated under 
any of the following conditions * * * 5, while used for 
demonstrating or testing." It was admitted that the acci- 
dent happened as described by the plaintiff's chauffeur, who 
testified that "after taking the owner for a drive, he re- 
turned to the hotel. I made a slight adjustment of the 
carburetor and took the car out to see what effect it had on 
the running of the motor, and in going around a turn the 
accident occurred." 

It was held that it was a question for the jury whether, 
under the circumstances, the use of the automobile at the 
time the damage was done constituted such a demonstra- 
tion or test as was contemplated by the condition mentioned. 
The terms used were considered not so self-explanatory, or so 
well understood by the general public, that it could be held 
as a matter of law that adjusting the carburetor and ascer- 
taining the result of that adjustment by the owner's chauf- 
feur, when he returned the car to the barn after an ordinary 
family drive, constituted "demonstration and testing" as used 
in the policy. The testimony submitted by the experts was 
contradictory, and each party claimed that the admitted facts 
did or did not constitute a demonstration or test. This con- 
flict, it was held, but emphasized the judge's duty to fairly 
submit this fact to the jury. Kunkle v. Union Casualty Co., 
(1916) 62 Pa. Superior Ct. 114. In this case the court said: 



INDEMNITY INSURANCE 141 

"Automobile insurance is a new business, and deals with 
methods and complicated machinery of recent introduction; 
the several parts and the operation of the automobile have 
given to us many new words of indefinite meaning, and it 
is often necessary to rely on the mechanicians and trade ex- 
perts to reasonably understand them, and, as in this case, 
the selected experts often differ in the meaning to be given 
to words that in other business affairs seem to have a clear 
and precise significance. This dispute was purely one of fact, 
and experts, who claimed technical and peculiar knowledge on 
the subject, were called by each party to give their opinions 
as to the business or trade meaning of the words — demonstra- 
tion and testing. It is true that words, if of common use, 
are to be taken in their natural, plain, obvious and ordinary 
significations ; but if technical words are used, they are to 
be taken in their special or technical sense, unless a contrary 
intention clearly appears in either case from the context." 

§123. Violation of Statute and Provision of Policy as to 

Age oi Driver. — Indemnity policies usually contain a stipula- 
tion that the company will net be liable if the automobile, 
at the time of an injury, is driven or manipulated by any one 
under the statutory age limit, or under a specified age in any 
event. Such provisions are valid and will be given effect to. 
The questions arising regarding the clause are mainly ques- 
tions of fact, as to whether the automobile was, or was not, 
at the time of the injury, being "driven or manipulated" in 
violation of the clause or of the statute. 

A liability policy contained a clause reading : "This policy 
does not cover in respect of any automobile while driven or 
manipulated by any person contrary to the statutory age 
limit of any state or under the age of sixteen years where 
there is no age limit." The Minnesota statute prohibits the 
issuing of a license to a person under 18, but does not pro- 
hibit anyone under 18 from driving an automobile as a hired 
chauffeur. An employee of the insured, over 16 but under 18, 
obtained a license, and, while operating the car, injured in 



142 AUTOMOBILE INSURANCE LAW 

a collision an occupant of another automobile, who obtained 
a judgment against the insured. In an action on the policy- 
it was held that the language of the exception is not clear. 
It may be construed to mean only that the insured will not 
be protected if his automobile is driven by a person who is 
either under 16 or under such age as the statute fixes as the 
minimum. Under that construction the company was liable. 
The construction for which the company contended was that 
there is no liability if the insured's automobile was driven by 
a person under the minimum age fixed by statute for licensed 
chauffeurs, viz., 18 years. It w r as held that under the lan- 
guage of the Minnesota statute the company was liable, a 
prior statutory provision prohibiting a person under 18 from 
driving as a chauffeur having been either intentionally or in- 
advertently dropped from the statute in 1915. Mannheimer 
Bros. v. Kansas Casualty & Surety Co., (1920)— Minn.— 180 
N, W. 229. 

A provision of a policy that the insurance company should 
not be liable for accidents if the automobile, at the time of 
accident, was being driven by a person in violation of law as 
to age, was held sufficient to protect the company against 
liability where the automobile was being driven by a 16 year 
old son of the insured in violation of a city ordinance making 
it unlawful for any person under 18 years of age to drive 
an automobile within the city limits, if the ordinance was valid 
in fact, but not if it was invalid. Royal Indemnity Co. v. 
Schwartz, (1915)— Tex. Civ. App.— 172 S. W. 581. 

A policy which indemnified the insured against damages 
for personal injuries caused by his automobile expressly pro- 
vided that the insurer should not be liable "in respect of in- 
juries caused in whole or in part by an automobile while being 
driven or manipulated by any person in violation of law as 
to age." The New York Appellate Division holds that there 
can be no recovery under such a policy on a judgment re- 
covered against the insured for personal injuries, where it 
appears that there was a violation of subdivision 2 of section 
282 of the New York Highway law, the car at the time of 



INDEMNITY INSURANCE 143 

the injury having been driven by the insured's son, who was 
under 18 years of age and was not accompanied by a duly 
licensed operator or by the owner of the car, as required by 
the statute. Morrison v. Royal Indemnity Co. (1917) 180 
App. Div. 709, 167 N. Y. Supp. 731. 

A policy indemnifying the car owner against loss for bodily 
injuries accidentally inflicted upon others provided that the 
company should not be liable while the automobile was being 
driven by any person "under the age fixed by law" or under 
the age of 16 in any event. It was held that this clause had 
reference solely and exclusively to the minimum age (not less 
than sixteen) at which one might lawfully drive a motor 
vehicle ; and the company could not escape liability for a loss 
sustained while the car was driven by an unlicensed person 
over 16, merely because of the non-observance of the 
statutory requirement that a licensed operator should accom- 
pany the unlicensed driver — a requirement which had no 
relevancy to the age of the driver. Brock v. Travelers In- 
surance Co. (1914) 88 Co'nn. 308, 91 Atl. 279. 
An indemnity policy contained the following clause: 
"This policy does not cover loss from liability for, or any 
suit based on, injuries or death caused by any automobile 
while driven or manipulated by any person under the age 
fixed by law or under the age of sixteen years in any event." 
In an action on the policy, the question was whether, under 
the circumstances, the automobile was, at the time of the 
accident, "driven or manipulated" by the insured or his 
son, who was less than sixteen years of age. It ap- 
peared that, while the automobile was being driven by 
the son, the father "suddenly leaned over to the left and took 
the wheel from his son, telling him to get out of the way," 
that "the son shrunk back in the seat ,and the father there- 
after guided the course of the automobile and entirely con- 
trolled its operation so far as possible to do so in the position 
in which he was, and the son thereafter did nothing except 
to blow the horn," that under these conditions the automobile 
crossed parallel street railway tracks, passed in front of a 



144 AUTOMOBILE INSURANCE LAW 

street railway car and then proceeded between the street 
car and the sidewalk, and ran into the plaintiff, who 
was standing on the street for the purpose of taking 
the car. It was held that a finding was warranted that at the 
time of the plaintiff's injury the automobile was "driven or 
manipulated," within the meaning of the policy, by the in- 
sured. Williams v. Nelson ,(1917) 228 Mass. 191, 117 N. E. 189. 

The violation of the statute must, it appears, have some 
causative connection with the accident. While a policy agree- 
ing to indemnify an insured against damages resulting to' him 
because of his violation of a criminal statute is illegal and 
void, an indemnity policy agreeing to indemnify the insured 
against loss by reason of the operation of an automobile is 
founded on a good and valid consideration and is not, it is held, 
made void by an incidental violation of a statute prohibiting 
the operation of an automobile by an infant. So recovery was 
had under an indemnity policy, although the car was being 
operated in violation of the statute by a boy under 18 years 
of age, where no causative connection was alleged in the 
insurance company's answer between the operation of the car 
by the infant and the happening of the accident. Messersmith 
v. American Fidelity Co. (1919) 187 N. Y. App. Div. 35, 175 
N. Y. Supp. 169, reversing 167 N. Y. Supp. 579. 

The court said: "For all that appears here, the boy driving 
the car may have been a most skillful driver, and the injury 
may have been entirely without fault on his part. The viola- 
tion of the statute may not have had anything whatever to do 
with the accident. If the violation of the statute can, under 
any circumstances, be a good defense to the policy in question, 
it cannot be under the answer as drawn, because it does not 
allege a causative connection between the violation of the 
statute and the accident. ,, 

§124. Violation of Speed Ordinance. — A policy indemnify- 
ing a taxicab company for accidents to persons caused by its 
taxicabs is broad enough to cover a loss sustained by the in- 
sured from an accident arising from violation of a speed 



INDEMNITY INSURANCE 145 

ordinance by one of its drivers, in the absence of a clause 
excepting such a risk. Taxicab Motor Co. v. Pacific Coast 
Casualty Co., (1913) 73 Wash. 631, 132 Pac. 393. A policy 
indemnifying the owner of taxicabs against consequences aris- 
ing from wilful violations of a statute by the insured himself, 
would be void as against public policy, but such an owner 
may be lawfully insured against the consequences of such vio- 
lations by his servants and employees, if such acts are not 
directed by or participated in by the insured. 

§125. Violation of Statute as to Registration. — It would 
seem that under a policy of indemnity the insurance company 
could not escape liability upon the ground that the insured was 
operating his automobile in violation of law because he had 
not had it registered. Messersmith v. American Fidelity 
Co., (1919) 187 N. Y. App. Div. 35, 175 N. Y. Supp. 169, re- 
versing 101 Misc. (N. Y.) 598, 167 N. Y. Supp. 579. 

§126. Actual Payment of Loss by Insured; Liability or In- 
demnity. — A provision of the policy making the company 
liable only after payment by the insured of the loss, after 
actual trial of the issue, is valid. This clause distinguishes the 
policy as one insuring against loss and not against liability. A 
judgment for the amount alone, without payment, will not, 
ordinarily, make the company liable. 

A by-law of an automobile insurance association read as 
follows : "No action shall lie against this association to re- 
cover for any loss sustained by a member unless it shall be 
brought by any such member for loss or expense actually paid 
in money by him, after actual trial of the issue, nor unless 
such action is brought within eighteen months after payment 
of such loss or expense." It was held, in an action against 
the association for the amount of a judgment recovered 
against a member, but which had not been paid, the mem- 
ber having become bankrupt, that payment in money by a 
policy holder of his loss and expense, after trial of the issue 
was a condition precedent to action on his policy, notwith- 
standing a provision of another by-law that the association 



146 AUTOMOBILE INSURANCE LAW 

would, at its own cost, defend suits for damages against mem- 
bers ; and the condition was not waived or forfeited by the 
company's defending the action in which the issue was tried, 
pursuant to the by-law casting the defense upon the insurer. 
Emerson v. Western Automobile Indemnity Assn., (1919) 105 
Kan. 242, 182 Pac. 647. The court said: "After accident, 
an automobile owner is not grievously concerned about either 
legal liability or expenses, so long as an insurance company 
must pay the bills. To protect itself against indifference, im- 
providence, and even collusion and downright fraud, the in- 
surer is obliged to undertake defense and make its own out- 
lays for expenses. Under these circumstances, the insurer is 
not put to any election to forego these protective measures, or 
give up writing indemnity policies. Until the state interferes, 
an indemnity policy may lawfully be written which permits 
the insurer to guard against rendition of a judgment when 
there was no liability, and against rendition of a collusive or 
unjust judgment when there was liability. An automobile 
owner may take or leave such a policy ; but when such a con- 
tract has been made, the insurer is not required to give up 
one feature in order to enjoy the benefit of the other." 

But if the insurer, by wrongful conduct, unjustifiably pre- 
vent payment of loss in money after trial of the issue, it will 
be precluded from asserting, in an action on the policy, that 
the policy did not mature by reason of non-payment. And 
in such an action, certainty that payment would have been 
made if the insurer had not meddled, is not essential to 
estoppel. Reasonable assurance, under all the circumstances, 
that payment would have been made is sufficient. Emerson 
v. Western Automobile Indemnity Assn, (1919) 105 Kan. 
242, 182 Pac. 647. 

It is held that under a condition providing that no action 
shall lie against the insurance company to recover for any 
loss unless brought by the insured for loss actually sustained 
and paid by him in money in satisfaction of a judgment after 
trial of the issues, and that no action shall lie to recover under 
any other agreement of the company therein contained 



INDEMNITY INSURANCE 147 

unless brought by the assured himself to recover money 
actually expended by him, no right of action accrues to the 
insured where a judgment has been recovered against him 
for personal injuries sustained by a third person through the 
insured's alleged negligence unless he has actually paid the 
judgment. It follows that interest should not be charged 
prior to such payment. McClung v. Pennsylvania Taximeter 
Cab Co. (1916) 25 Pa. Dist. Ct. 583. 

§127. What Constitutes Payment of Judgment. — The 

payment of a judgment by a promissory note for its amount 
satisfies a condition that no action shall lie against the com- 
pany unless brought to reimburse the insured "for loss actual- 
ly sustained and paid by him in satisfaction of a final judg- 
ment" where bad faith in giving the note is not shown, and 
the settlement was approved by the probate court. Taxicab 
Motor Co. v. Pacific Coast Casualty Co. of San Francisco 
(1913) 73 Wash. 631, 132 Pac. 393. 

A condition of payment by the insured "within ninety 
days from the date of such judgment and after trial of the 
issues" is satisfied by payment within ninety days after the 
date of affirmance of the judgment by the Supreme Court. 
Taxicab Motor Co. v. Pacific Coast Casualty Co. (1913) 73 
Wash. 631, 132 Pac. 393. 

Where judgments were recovered against the insured and, 
being insolvent, it borrowed the money and paid the judg- 
ments, giving its note to the lender, and afterwards took 
up the note by assigning its cause of action against the insur- 
ance company, it was held that the burden was on the insur- 
ance company, seeking to escape liability on the ground of 
bad faith, to show some fact that would impeach the trans- 
actions, in the absence of a provision in the policy that the 
company shall not be lable if the insured becomes insolvent 
and borrows money to pay losses. Campbell v. London & 
Lancashire Indemnity Co. of America (1917) 168 N. Y. Supp. 
300. 

A provision in an indemnity policy that: "No action shall 
lie against the company to recover for any loss or expense 



148 AUTOMOBILE INSURANCE LAW 

under this policy unless it shall be brought by the assured 
after actual trial of the issue," was held satisfied where the 
assured refrained from settling an action against him until 
after a complete record of the facts relating to his liability 
had been made by the presentation of all the evidence, espe- 
cially where the insurance company had broken its contract 
by refusing to defend the action against the assured. Mayor, 
Lane & Co. v. Commercial Casualty Insurance Co. (1915) 169 
App. Div. 772, 155 N. Y. Supp. 75. " 

A policy providing that if any person should sustain bodily 
injury by accident by reason of the use of the automobile 
for which injury the insured should be or be alleged to be 
liable for damages, the company would indemnify him against 
such liability and would pay all costs incurred with the com- 
pany's written consent indemnifies against liability as dis- 
tinguished from loss; and where the company refuses to de- 
fend an action against the insured, it is liable for a reason- 
able attorney's fee, for which the plaintiff has rendered him- 
self liable in defending the action, though he has not paid 
the fee. Royal Indemnity Co. v. Schwartz (1915) — Tex. 
Civ. App— 172 S. W. 581. 

§128. Condition as to Payment Prohibited by Statute. — 

Massachusetts St. 1914, c. 464, which in substance prohibits 
the insertion in a contract of casualty insurance, made after 
that statute took effect, of a condition that the insured must 
pay the amount of the loss before liability attaches to the 
insurer, is held constitutional by the courts of that state. 
Lorando v. Gethro, (1917) 228 Mass. 181, 117 N. E. 185. 

§129. Voluntary Payment by Insured Not Actual Payment. 

— An insured company cannot, by its voluntary act in de- 
fending suit against its manager, add to the liability of the 
indemnity company, and thus make it indemnify the manager 
against the consequences of his negligence. So, where a 
policy provided that no action would lie against the insur- 
ance company under it unless brought to reimburse insured 
for a loss paid in money after trial in satisfaction of a judg- 
ment against the insured, the company was held not liable 



INDEMNITY INSURANCE 149 

where the insured, a company, defended and paid a judgment 
against its manager for injuries caused while the car was be- 
ing used by the manager for his own purposes. Rock Springs 
Distilling Co. v. Employers' Indemnity Co. of Philadelphia 
(1914) 160 Ky. 317, 169 S. W. 730. 

§130. Right of Person Injured to Sue Insurance Company. 

— Akin to the question as to whether a policy is a contract 
of liability or indemnity is that of the right of the person in- 
jured to sue the insurance company. 

An indemnity policy contained the following provision: 
"No action shall lie against the company to recover ifor 
any loss or expenses under this policy unless it shall be 
brought by the assured for loss or expense actually sustained 
and paid in money by him after actual trial of the issues, nor 
unless such action is brought within two years after payment 
of such loss or expense." In July, 1911, a person was injured 
by an automobile operated by the automobile company pro- 
tected by this policy and recovered a judgment for $1,500 in 
November, 1912. The automobile company went into the hands 
of a receiver some time in 1911. No part of the judgment 
was ever paid to the injured person, although he demanded 
payment from the receiver, and requested him to bring suit 
on the insurance policy, and offered to indemnify him for 
any cost incurred in that behalf. The injured person then 
sued the insurance company. 

The Alabama Supreme Court held that under the express 
provisions of the policy, the assured, the auto company, had 
no right of action against the insurance company, except 
for liabilities actually discharged by the payment of money. 
Not having met this essential condition of the indemnity con- 
tract, the auto company could not itself maintain any action 
on the policy. Certainly a stranger to the contract could not 
do so directly or indirectly. Goodman v. Georgia Life Ins. 
Co. (1914) 189 Ala. 130, 66 So. 649, disapproving the doctrine 
of Patterson v. Adan (Philadelphia Casualty Co., etc. Gar- 
nishees, 1912) 119 Minn. 308, 138 N. W. 281, 48 L. R. A. (U. S.) 
184 and citing a number of employers' indemnity cases in 



150 AUTOMOBILE INSURANCE LAW 

support of its opinion. The court said : "Courts cannot tamper 
with and change the terms of contracts, nor can they sub- 
stitute as beneficiaries thereunder unnamed and unintended 
strangers who have nothing whatever to do with either the 
contracts or the contractors. To exercise such powers would 
be to usurp despotic authority. 

"If the insurance company received the funds of the auto 
company in payment of the policy premium under circum- 
stances which made their diversion from the coffers of the 
auto company a material fraud upon complainant, he might 
recover the amount of the premium in a proper proceed- 
ing; but he cannot claim the fruits of the contract." It was 
held to be immaterial that the insurance company's attorney, 
at its instance, defended the suit against the auto company 
for a time, and then suffered a judgment by default. 

The Alabama court, on a rehearing of the Goodman case, 
considered that a contrary construction of such an insurance 
contract, "is dominated by an undue regard for the injured 
stranger, rather than by a consideration alone of the intention 
and the obligations of the contracting parties. Such insur- 
ance contracts as these may be one-sided and unsatisfactory in 
their operation, but we know of no principle of law or public 
policy which forbids their operation exactly as stipulated 
by the parties, with which, as already stated, a stranger to 
the contract has absolutely no concern." 

Where, under the clear provisions of the policy, it operates 
for the benefit of any injured person, and such injured person 
is authorized to sue the insurance company, such person may, 
under the Texas system of procedure, join in the same action 
the owner of the car and the insurer, even though the insurer 
is liable only after judgment has been awarded against the 
owner, and the cause of action against the owner sounds in 
tort and that against the insurer is based on contract ; the 
two causes of action arising out of the same transaction. 
American Automobile Insurance Co. v. Struwe, (1920) — Tex. 
Civ. App.— 218 S. W. 534. 

Massachusetts St. 1914, c. 464, which gives tq a person 



INDEMNITY INSURANCE 151 

injured by fault of the insured in a manner covered by the 
policy a beneficial interest in the proceeds thereof and per- 
mits him, after he has obtained a judgment against the in- 
sured, to maintain a suit in equity in his own name to pro- 
cure the application of the insurance money to the satisfaction 
of his judgment, is held constitutional in Lorando v. Gethro 
(1917) 228 Mass. 181, 117 N. E. 185. 

§131. "Bodily Injury" As Affecting Third Person's Right 
to Recover. — The Massachusetts statute, St. 1914, c. 464, 
permits a judgment creditor of one insured by a con- 
tract of casualty insurance against loss or damage on account 
of bodily injury or death by accident of any person arising 
from causes for which the insured is responsible, such judg- 
ment having been recovered for a cause covered by the con- 
tract of insurance, to proceed in equity against the insured and 
the insurer to reach and apply the insurance money to the 
satisfaction of the judgment. 

The language of the statute renders it applicable to every 
contract of insurance whereby one "is insured against loss or 
damage on account of the bodily injury or death by accident 
of any person." The words "loss or damage" in this connec- 
tion in the light of their context, and the manifest purpose 
of the statute, include a case where the insured has been held 
responsible to the extent of the rendition of a judgment 
against him, although no payment has been made on the 
judgment. 

"Bodily injury", as used in the statute, imports, as it or- 
dinarily does, harm from corporeal contact. In this con- 
nection "bodily" refers to an organism of flesh and blood. 
It is not satisfied by anything short of physical, and is con- 
fined to that kind of injury. It does not include damage to 
the financial retotifces of thi husband arising from a bodily 
Injuiy to his wife. Fersonal injury in other connections has 
been held to be of more comprehensive significance. But 
"bodily injury * * * of any person" cannot reasonably be 
heid to include the kind of loss suffered by the husband. 
Therefore the husband is not entitled to recover the insur- 



152 AUTOMOBILE INSURANCE LAW 

ance money in such a suit. Williams v. Nelson, (1917) 228 
Mass. 191, 177 N, E. 189. 

§132. Judgment Against Insured; Garnishment. — Where, 
under a policy insuring against loss by the operation of the 
insured's automobile, an action is brought by a person injured 
by the car against the insured, and the insurance company 
thereupon takes sole charge of the defense, to the exclusion of 
the insured, as it had the right to do under the policy, it has 
been held that a judgment in the action against the insured be- 
comes, as between the plaintiff, the defendant, and the com- 
pany, a liability or debt owing unconditionally by the com- 
pany to the insured, which the plaintiff may reach by gar- 
nishment. Patterson v. Adan, (1912) 119 Minn. 308, 138 N. 
W. 281. The court admitted that this conclusion is not in 
accord with the weight of authority; but in the cases cited 
to sustain the opposite of the rule it was not clear that the 
company took exclusive, or any, charge of the litigation, and 
therefore, in the court's opinion, sufficient consideration was 
not given to this feature of the contract. (The doctrine of 
this case was disapproved in Goodman v. Georgia Life Ins. 
Co., 189 Ala. 130.) 

§133. Aid by Insured in Defense of Negligence Action. — 

The insured in an indemnity policy is usually required by a 
clause in the policy to assist in the defense of actions against 
him. 

An automobile indemnity policy contained the provision 
that : "The assured, when requested by the company, shall 
aid in effecting settlements, securing evidence, the attendance 
of witnesses and in prosecuting appeals. " While riding with 
the assured in the car, the assured's sister was injured by 
falling from the front seat when the car skidded or by other 
accidental means struck a post at the edge of the pavement. 
She sued her sister, recovering a verdict and judgment for 
$730 and costs. The assured sued the insurance company. 
One of the company's defenses was that the assured failed to 
comply with the quoted provision requiring her to assist in 



INDEMNITY INSURANCE 153 

procuring evidence for use in defense of any action, or to 
rely in her defense upon a plea of contributory negligence 
of her sister. There was some evidence of eye-witnesses 
that the injured sister was sitting sidewise on the edge 
of the front seat with her back to the door, talking to the 
assured, who sat on the back seat. It was held that it was 
for the jury, which found for the insurance company, to say 
whether the refusal to plead contributory negligence was a 
violation of the quoted clause. Collins' Executors v. Stan- 
dard Accident Insurance Co., (1916) 170 Ky. 27, 185 E. W. 112. 

In this case the insurance company's chief defense was 
that the judgment recovered against the insured by her sister 
was procured by and through fraud and collusion between 
them. The evidence in the negligence case, the company 
contended, showed (1) that the insured, in notifying it of 
the accident, claim and action, falsely represented that there 
were no witnesses known to her other than her sister and 
herself, when she knew that the accident was witnessed by 
her own chauffeur and by another chauffeur, who lifted her 
sister from the street and placed her in the automobile after 
the accident; (2) that in giving such notice, she suppressed 
information of the fact that the injured person was her sister 
and had resided with her for several years, and falsely repre- 
sented that her residence was elsewhere; (3) that she failed 
and refused to render assistance to the insurance company in 
securing evidence for use in the trial of her sister's action 
against her, and refused to make the defense advised her by 
the insurance company's counsel would be authorized by the 
lav/ and facts; and (4) that she gave assistance to her sister 
in the latter's action against her, by carrying her in her auto- 
mobile to her attorney's office during the latter's prepara- 
tion of the case for trial, carrying her and some of her wit- 
nesses to and from the courthouse during the trial, and, on 
one occasion, during the trial, taking her sister and her wit- 
nesses to a restaurant for luncheon and returning them to the 
courthouse. This was held sufficient to authorize submis- 



154 AUTOMOBILE INSURANCE LAW 

sion to the jury of the question of fraud and collusion be- 
tween the assured and the injured person. 

A valid defense to an action on an indemnity policy that 
the insured did not render the company such co-operation 
and assistance in the defense of the action against the in- 
sured as the policy required is held not shown by the fact 
that an officer of the insured at the inquest made certain 
statements concerning the instructions given the different 
drivers with reference to their duties which conflicted with 
his evidence at the trial of the action for damages, where it 
is not shown that he wilfully testified falsely or that his 
testimony affected the jury's verdict. Taxicab Motor Co. v. 
Pacific Coast Casualty Co. (1913) 73 Wash. 631, 132 Pac. 393. 

If the company, taking charge of the defense of the action 
against the insured, has a defense that other causes than 
the wounds inflicted by the automobile caused the death sued 
for, it should make that defense in the action for damages, 
and cannot afterwards make it in an action on the policy. 
Taxicab Motor Co. v. Pacific Coast Casualty Co. (1913) 73 
Wash. 631, 132 Pac. 393. 

§134. Settlements by Insured Without Insurer's Consent, 

— A clause in an indemnity policy provided: "The assured 
may settle any case at the assured's own expense, giving 
immediate notice thereof in writing to the company, and the 
assured may settle any case at the company's expense, if the 
company shall have previously given its consent in writing." 
Under such a clause a settlement by the insured without the 
insurance company's consent will release the company from 
all liability to the insured. Kennelly v. London Guarantee 
& Accident Co., Ltd, (1918) 184 App. Div. 1, 171 N. Y. Supp. 
423. 

An insured sued on a policy for $5,000, against loss or ex- 
pense on account of bodily injuries accidentally suffered by 
reason of the use of his automobile. It was alleged that the 
insured agreed to compromise an action for $10,000 against 
him for $3,150; that the insurance company, to escape pay- 
ment of $750 of this sum, refused to compromise the claim 



INDEMNITY INSURANCE 155 

unless the insured would contribute that sum to the $3,150, 
and threatened that otherwise it would allow the case to go 
to trial and subject the insured to the hazard of having a 
verdict recovered against him in excess of the $5,000 limit 
of the policy, and forced the insured to pay the $750. It was 
held that, as there was no allegation that by the terms of 
the policy (which was not itself made part of the complaint), 
the insurance company agreed to consent to a settlement of 
any claim for less than the $5,000 limit, provided the sum 
the claimant was willing to accept was reasonable and fair 
and less than the amount which would probably be recovered 
in an action, the complainant failed to make out a cause of 
action. Levin v. New England Casualty Co., (1916), 97 Misc. 
7, 160 N. Y. Supp. 1041 ; (1917), 101 Misc. 402, 166 N. Y. Supp. 
1055, affirmed (1919) 187 App. Div. 935, 174 N. Y. Supp. 910. 

Where the insurance company fails to perform its contract 
duty to defend, it waives the right to the benefit of provisions 
precluding the assured from settling and limiting its liability 
to losses sustained by the assured after the trial of the issues. 
But when, under such a policy, the insured settles an action 
before judgment, he assumes the risk in an action against 
the insurance company of showing, not only a liability cov- 
ered by the policy, but the amount of the liability, and the 
recovery against the insurance company will be limited by 
the loss sustained, though the evidence may show that the 
settlement was for less than the liability. Mayor, Lane & Co. 
v. Commercial Casualty Co., (1915) 169 App. Div. 772, 155 N. 
Y. Supp. 75. 

§135. Effect of Insurer's Refusal to Accede to Compro- 
mise. — The holder of a policy indemnifying the insured to 
the extent of $5,000 against loss by accident resulting in in- 
juries or death to any person, pending suit by the administra- 
trix of a person alleged to have died as the result of such an 
accident, which suit was defended by the insurance company, 
learned of the willingness of the plaintiff to accept $3,750 in 
full settlement of any damages that might be recovered in 
excess of $5,000, but the insured did not pay that sum to the 



156 AUTOMOBILE INSURANCE LAW 

administratrix. It was held that the insurance company 
was not liable for damages caused to the insured by an excess 
judgment on account of the insurer's refusal to accede to the 
proposed compromise. 

The policy in this case merely provided that the insured 
might not incur expense or settle a claim "except at his own 
cost." It was held that payment, pending suit, of the $3,750 
which the administratrix offered to accept in settlement of 
any damages she might recover in excess of $5,000, was not 
forbidden, where such payment would not increase the com- 
pany's liability or enhance its difficulties in defending the 
action. 

On the latter point, two of the five judges dissented, on 
the ground that "the plaintiff expressly agreed that he would 
not, without the written consent of the insurance company, 
settle any claim or interfere in any legal proceeding ;" that 
the proposed payment or settlement "would have been a vio- 
lation of his agreement, and it was for the insurance com- 
pany to say whether or not it would permit him to do as he 
wished." McAleenan v. Massachusetts Bonding & Ins. Co. 
(1916) 173 App. Div. 100, 159 N. Y. Supp. 401 affirmed 219 N. 
Y. 563, 114 N. E. 114. | . ;i 

§136. Interference with Negotiations. — What constitutes 
"interference" within the meaning of a clause forbidding the 
insured to "interfere in negotiations for compromise" it would 
in many cases be difficult to say. It has been held, however, 
that such a condition is not breached by the insured's action 
in mentioning to a party he had injured the fact of his in- 
surance and telephoning him that the lawyer who would 
call on him, though he might call himself the insured's law- 
yer, was not his, but the insurance company's. Hopkins v. 
American Fidelity Co. (1916), 91 Wlash. 680, 158 Pac. 535. 
The court said : "It is obviously impossible for the assured to 
avoid conversation with the injured, their families, or their 
representatives. Indeed, the insurer himself must desire them 
to say what they can to reduce irritation. If they are then 
compelled to admit that they are insured, the law will not 



INDEMNITY INSURANCE 157 

forbid their admitting the truth, and as to their voluntarily 
telling- it, that is saying little more than claimants know. The 
vast majority of those who own automobiles are thus in- 
sured, and nearly every claimant knows or believes that they 
are. Neither can Ave assume that even if claimants do not 
know or suppose this, they will be harder to deal with when 
they find it out. That will depend on whether the owner ap- 
pears of ample means himself." 

§137. Interference in Suits, — Under a provision in a liability 
policy that the insured should not "interfere in any negotia- 
tions for settlement or legal proceeding without the consent 
of the company previously given in writing," it was held 
that a settlement by the insured of a suit brought by him 
against a third person, resulting from a collision with such 
third person's automobile, did not violate the policy, since the 
insurer, while having a right to control suits brought against 
the insured, could not control suits by the insured. And it 
was immaterial that it was stipulated in such settlement that 
it should not be used in evidence in actions against the in- 
sured, in the absence of a proven conspiracy on the part of 
the insured and others to aid the prosecution of suits against 
the insured and to impair the defense of them by the insur- 
ance company to its pecuniary loss. Utterback-Gleason Co. v. 
Standard Ace. Ins. Co. of Detroit, (1920) 179 N. Y. Supp. 836. 

Where a liability policy contains a condition providing that 
the insured "shall not interfere in any negotiations for set- 
tlement or in any legal proceeding against the company on 
account of any claim," the insured has no claim against the 
compairy beyond the limit of liability prescribed by the policy, 
although the company took charge of the litigation against 
him upon which the claim was based and refused to make a 
settlement for much less than the judgment ultimately re- 
covered. Such a condition places the litigation wholly within 
the control of the company without regard to the fact that 
its conduct may result in a judgment against the insured 
greatly in excess of the limit of liability in the policy. 
McClung v. Pennsylvania Taximeter Cab Co., (1916), 25 Pa. 



158 AUTOMOBILE INSURANCE LAW 

Dist. 583, quoting and following Schmidt v. Travelers' In- 
surance Co., 244 Pa. 286, construing a similar clause. 

§138. Waiver by Insurer of Defense by Assuming Control 
of Suit. — A defense by the insurer that the liability is not 
within the terms of the policy, is waived when it, with knowl- 
edge of the facts, and without reserving its rights, assumes 
absolute control of the action brought against the insured. 
American Indemnity Co. v. Fellbaum (1920), — Tex. Civ. App. 
—225 S. W., 873; Oakland Motor Co. v. American Fidelity 
Co. (1916) 190 Mich. 74. (See §142.) 

Where the insured corporation warned the insurance com- 
pany that the latter would be held to the terms of the policy, 
notwithstanding a release executed by the president of the 
insured corporation in settlement of his personal injury action 
against the driver of the automobile with which he, in the 
insured corporation's automobile, had collided, that the in- 
sured corporation would insist on the insurance company's 
defending suits by occupants of the other automobile, and 
that the insured corporation would not accept the insurance 
company's proposition to defend the actions without waiver 
of or prejudice to the insurance company's right to disclaim 
liability, the insurance company, by remaining in and con- 
tinuing to defend such an action against the insured corpora- 
tion, was held estopped, after judgment had been rendered 
against the insured, from disclaiming liability on the policy 
because of such release. Utterback-Gleason v. Standard Ac- 
cident Insurance Co., (1920) 193 App. Div. 646, 184 N. Y. 
Supp. 862, affirming 179 N. Y. Supp. 836. Where an in- 
surance company has, with full knowledge of the facts, 
undertaken to defend against the claim and suit of a per- 
son injured by an automobile which is the subject of a 
liability policy, in which the company has not only bound 
itself to assume the defense of "any claim" against which 
it undertakes to indemnify the insured, but has also excluded 
him from all right to act independently of the company in 
the matter of such suit, by a provision in the policy that 
the "assured shall not voluntarily assume any liability, either 
before or after the accident, nor shall he, without the written 



INDEMNITY INSURANCE 159 

consent of the company, incur any expense or settle any claim 
except at his own cost, nor interfere in any negotiation for 
settlement or in any legal proceeding conducted by the com- 
pany on account of any claim, "the company cannot, while the 
case is still pending and undetermined, rightfully abandon it 
for no better reasons than its belated conviction that the 
policy did not impose upon it the duty to assume such de- 
fense because the accident was caused while the car was 
being driven by the owner's son and not by himself." Fuller- 
ton v. United States Casualty Co., (1919), 184 Iowa 219, 167 
N. W. 700. The court said that the conduct of the insurance 
company in taking the business out of the hands of the 
insured after it was notified of the accident and two claims 
arising therefrom "was tantamount to an agreement or 
mutual concession that the policy was intended to cover these 
claims for damages, and, both parties having proceeded on 
that basis to a settlement with the Hockenburgs, and on to 
a point midway in the Jacobson suit, the insurer will not be 
permitted then to change front, abandon a defense it had 
undertaken, and escape liability, on the plea that it has mis- 
taken the nature of its obligation. " 

The insurance company, however, does not waive its rights 
to disclaim liability under the policy by continuing the trial 
of the negligence action for a brief period after learning 
facts absolving it from liability ; as where, after it has learned, 
on the last day of the trial, that the supposed licensed chauf- 
feur accompanying the insured's minor son was not duly 
licensed. Morrison v. Royal Indemnity Co., (1917), 180 App. 
Div. 709, 167 N. Y. Supp. 732. 

§139. Effect of Insurer's Failure to Appeal. — Where a 
liability company assumed the defense of an action against 
an insured owner, and a judgment was entered for a sum 
exceeding the amount of its liability, and the company, 
through its attorneys, promised and assured the owner that 
it would appeal and secure a reversal of the judgment, but 
failed to appeal, the owner not being advised of such failure 
until after the time to appeal had expired, the company, in 



160 AUTOMOBILE INSURANCE LAW 

an action by the owner to recover damages suffered by 
reason of the company's failure to appeal, was held estopped 
to deny its liability, and that the defendant was damaged to 
the extent of the sum he w r as compelled to pay. McAleenan 
v. Massachusetts Bonding & Ins. Co., (1920) 190 N. Y. App. 
Div. 657, 180 N. Y. Supp. 287, affirmed 219 N. Y. 563. 

If the judgment against the insured in a negligence action 
exceeds the insurer's liability, the Tennessee Supreme Court 
holds that the insurer must either provide the required super- 
sedeas bond, and appeal, or pay the indemnity agreed upon. 
Seessel v. New Amsterdam Casualty Co. (1918) 140 Tenn. 
253, 204 S. W. 428. 

§140. Insurer Cannot be Enjoined from Defending Suit 
Against Assured* — An automobile insurance company cannot 
be restrained by an injunction from appearing by its own 
counsel and conducting the defense in an. action against the 
assured owner of an automobile to recover damages for per- 
sonal injuries. Gould v. Brock, (1908) 221 Pa. 38, 69 Atl. 1122. 

§141. Necessity for Notice to Insurer of Accident. — Under 
a policy requiring immediate notice to the insurer of acci- 
dents insured against, it is said that the condition does not 
apply to every trivial occurrence even though it may prove 
afterwards to result in serious injury, and that, if no apparent 
harm come from the mishap, and there is no reasonable 
ground for believing at the time that bodily injury will fol- 
low, there is no duty upon the insured to notify the insurer. 
Haas Tobacco Co. v. American Fidelity Co. (1919) 226 N. Y. 
343, (affirming 165 N. Y. Supp. 230), citing Melchior v. 
Ocean Accident & Guarantee Corp. (1919) 226 N. Y. 51. See 
also Fischer Auto & Service Co. v. General Accident, Fire & 
Life Assur. Corp. (1917) 8 Ohio App. 176. 

But this principle is not to be extended. Where a boy was 
knocked down in the street, and at least slightly injured, it 
was held that the insured may not, without any investiga- 
tion whatever, rely solely upon his own opinion, or upon that 
of his chauffeur, that because the boy went away the injury 



INDEMNITY INSURANCE 161 

was too trivial to require attention or investigation, and he 
is not excused from giving notice of the accident. Haas 
Tobacco Co. v. American Fidelity Co. (1919) 226 N. Y. 343, 
123 N. E. 755, affirming 165 N. Y. Supp. 230. , 

Under a provision requiring that the assured, upon the oc- 
currence of an accident, shall give immediate written notice 
thereof to the company, it may well be claimed that if the 
insured or his driver knows of even a slight injury to a third 
person in a collision, the stipulation of the policy would re- 
quire notice of such injury, even though the insured might 
deem it unnecessary. Fischer Auto & Service Co. v. General 
Accident Fire & Life Assur. Corp. (1917) 8 Ohio App. 176. 

It is proper to submit to the jury the questions of fact 
whether the circumstances of the accident were such as would 
have made it apparent to the insured that bodily injuries 
might result from the accident and whether the terms of 
the policy as to notice had been complied with. Fischer Auto 
& Service Co. v. General Accident, Fire & Life Assurance 
Corp. (1917) 8 Ohio App. 176. 

Under a policy insuring against loss by liability for damages 
for bodily injuries, notice of injuries to property only is not 
required. Fischer Auto & Service Co. v. General Accident, 
Fire & Life Assur. Corp. (1917) 8 Ohio App. 176. 

§142. Time for Notice of Accident. — The question of rea- 
sonableness of time within which notice is given the insur- 
ance company of an accident for which a claim is made under 
an indemnity policy, and of the sufficiency of excuses for 
delay, is to be determined according to the nature and cir- 
cumstances of each individual case, the insured in all cases 
being required to act with due diligence and without laches 
on his part. Chapin v. Ocean Accident & Guarantee Corp. 
(1919) 96 Neb. 213, 147 N. W. 465, 52 L. R. A. (N. S.) 227; 
Fischer Auto & Service Co. v. General Accident, Fire & Life 
Assurance Corp., (1917) 8 Ohio App. 176; Schambelan v. Pre- 
ferred Accident Insurance Co., (1916), 62 Pa. Superior Ct. 445. 

In a syllabus by the court in Chapin v. Ocean Accident, etc., 
Co., it is said: "In a case where no bodily injury is apparent 



162 AUTOMOBILE INSURANCE LAW 

at the time of the accidental occurrence, and there is no rea- 
sonable ground for believing that a claim for damages against 
the owner of the automobile may arise therefrom, he is not 
required to give the assurer notice until the subsequent facts 
as to injury would suggest to a person of ordinary and rea- 
sonable prudence that a liability to the injured person might 
arise. In such case the duty of the assured is performed if 
he gives notice within a reasonable time after the injury 
presents an aspect suggestive of a possible claim for 
damages/' 

An indemnity policy contained the following clause : "Upon 
the occurrence of an accident the insured shall give immedi- 
ate written notice thereof, with the fullest information ob- 
tainable, to the agent by whom this policy has been counter- 
signed, or to the company's home office. If a claim is made 
on account of such accident, the insured shall give like notice 
thereof with full particulars." In order to maintain an action 
on a policy containing such a clause, the insured is bound to 
give notice of both the accident and claim for damages as 
and when by the terms of the contract he agreed to do so. 
Conditions for notice of the event insured against such as 
these are common in policies for most kinds of insurance. 
They are nothing new or misleading. Such stipulations, 
when contained in the policy, are recognized as valid, and 
must be complied with before recovery can be had, if within 
the power of the insured. Failure by the insured to observe 
this condition precedent is failure to perform the contract 
on his part. 

An automobile manufacturing corporation held an in- 
demnity policy against accidents or injuries to third persons 
by its motor cars in testing them or before they were sold. 
This policy contained the foregoing clause as to notice, and 
obligated the insurance company to settle or defend litiga- 
tion and hold the insured harmless when due notice of service 
and of suit was given. In an action on the policy the insurance 
company claimed that notice of an accident, for which suit was 
begun, had not been served until over three months after the 



INDEMNITY INSURANCE 163 

injury, and that in the meantime one of the testers involved in 
the injury had left the automobile company's employ and gone 
to unknown parts, and it had suffered from the neglect to 
give notice. The insured's chief inspector of mechanical parts, 
who had supervision over the testers, and its head tester, 
both learned of the accident and claim from the injured 
party's attorney within two or three days after the event, 
with data as to time, place and parties. They were persons 
holding positions of trust and responsibility. They made no 
report to any of their superiors. Their excuse was that the 
two testers involved denied the claim. Notice to them was 
held notice to the insured, notwithstanding their belief in the 
testers' denial, and the insurance company was discharged 
from liability on the policy. Oakland Motor Co. v. American 
Fidelity Co., (1916), 190 Mich. 74, 155 N. W. 729. 

It appeared that the insurance company did take up the 
burden of defense of the claim under assurances and in the 
belief that the insured first learned of the matter when sum- 
mons was served on it, and only learned the facts as to the 
previous knowledge of the insured's agents when they were 
brought out on the trial, whereupon counsel raised the ob- 
jection and insisted that the insurance company had been 
both misled and handicapped by the long delay in notifying it, 
during which time it had no opportunity to see the parties 
and investigate before litigation was initiated, and the tester 
who, it was claimed, drove the offending automobile, had left 
the automobile company's employ and afterwards disap- 
peared, for which reasons counsel proposed to turn the de- 
fense over to attorneys of the insured and retire from the 
case. It was held that its assuming the burden of the de- 
fense would not constitute a waiver so long as the insurance 
company had no knowledge of the insured's previous in- 
formation and forfeiture of its rights under the policy; but 
whatever question that situation might otherwise have pre- 
sented, the insurance company was fully protected by an 
agreement which provided: "That all acts of the parties 
hereto with reference to the conduct of the defense of said 



164 AUTOMOBILE INSURANCE LAW 

case shall be considered as done without prejudice to their 
respective rights under said automobile policy." Oakland 
Motor Co. v. American Fidelity Co., (1916), 190 Mich. 74, 
155 N. W. 729. 

What is a reasonable time for giving notice must be de- 
termined by the court as a question of law when the facts 
are not in dispute. Oakland Motor Co. v. American Fidelity 
Co., (1916) 190 Mich. 74, 155 N. W. 729, holding that three 
months was an unreasonable time to delay notifying the 
insurance company. But if the lapse of time between the oc- 
currence of an accident and the notice thereof is not of 
such duration as would justify the court in disposing of the 
issue as a matter of law it should be submitted to a jury for 
proper determination. Schambelan v. Preferred Accident & 
Insurance Co., (1916), 62 Pa. Superior Ct. 445. 

Under policy provisions that "the assured upon the oc- 
currence of an accident shall give immediate written notice 
thereof with the fullest information obtainable" to the com- 
pany, and that "if claim is made on account of such acci- 
dent the assured shall give like notice thereof," the insured is 
not barred from recovery on the policy by the fact that he 
did not give immediate notice of the accident, where he had no 
knowledge of a person injured therein, and he gave immedi- 
ate notice as soon as he heard that a person had been injured 
and that a claim was made. Schambelan v. Preferred Acci- 
dent Insurance Co., (1916), 62 Pa. Superior Ct. 445 . The 
purpose of a provision in an insurance policy insuring against 
loss or damage caused by vehicles of the insured, which re- 
quires the insured to give written notice to the insurer "im- 
mediately upon the occurrence of an accident * * * with the 
fullest information obtainable at the time," is to enable the 
insurer to ascertain all the facts and circumstances surround- 
ing the accident while such facts are fresh in the memory 
of witnesses, so that the insurer may be prepared either to 
defend or to make settlement if any claim is thereafter 
made or suit brought for damages resulting from personal 
injuries. Forbes Cartage Co. v. Frankfort Marine, Acci- 



INDEMNITY INSURANCE 165 

dent & Plate 1 Glass Insurance Co. (1915) 195 111. App. 75. 
Under an insurance policy insuring against loss or damage 
caused by vehicles of the insured, where an accident occurs 
and the insured as a result of its own investigations is satis- 
fied that no claims for personal injuries can be successfully 
made, and such insured does not immediately notify the in- 
surer of the accident as required by the policy, the insured 
thereby elects to carry the risk itself and absolves the in- 
surer from liability. Forbes Cartage Co. v. Frankfort Marine, 
Accident & Plate Glass Insurance Co., (1915) 195 111. App. 75. 

§143. Waiver of Condition as to Notice of Accident — A 

failure to give notice within the time required of an accident 
in respect of which suit is subsequently brought on the policy 
will be a breach of the condition requiring such notice, un- 
less the insurance company waives the breach or estops it- 
self from denying the performance of the condition. Lee v. 
Casualty Co. of America, (1916), 90 Conn. 202, 96 Atl. 952. 
The court said: "The purpose of the notice of an accident is 
the same in casualty insurance as the notice of a loss by fire 
in fire insurance and of the death of an insured in life in- 
surance. Being for the benefit of the insurer, it rt^ay be 
waived by it in the one case as well as the others. It is well 
settled that the notice of loss by fire and death may be 
waived. The same principle is involved in the one case as in 
the others. There may be more reason why an insurer 
would insist upon the notice, and less likelihood that it would 
waive it, in the case of a casualty than in the other cases. It 
is a stipulation upon which it may insist, but one which it 
may waive." 

Waiver may be implied as well as expressed. It appeared, 
in an action on an indemnity policy, which contained no pro- 
vision that the policy should be forfeited by a breach of the 
condition as to immediate notice, that notice of the casualty 
was given by the plaintiff and received by the company's 
agent, but not immediately after the casualty, as required by 
the policy. The company, knowing this, and without claim- 
ing a breach of the conditons of the policy, proceeded at 



166 AUTOMOBILE INSURANCE LAW 

once, and continued for nearly two months, to attempt to 
make a settlement of the claim of the injured party. It 
then called upon the plaintiff for further information and 
proof as to the casualty, and two months later called upon 
him for the papers in the action which had been commenced 
by the injured person against the plaintiff, and shortly be- 
fore the trial of that case returned the papers to him with 
the information that it took no interest in the case, that it 
had cancelled the policy as of the date of issue, and there 
was no insurance in force at the time of the casualty. It was 
held that from these facts a very strong inference would 
arise that the company had intended to waive the plaintiff's 
breach of the condition respecting immediate notice ; and that 
if such was the fact, the company could not afterwards re- 
voke the waiver and insist upon a breach of the condition in 
order to relieve it from liability. Lee v. Casualty Co. of Amer- 
ica, (1916), 90 Conn. 202, 96 Atl. 952. 

§144. Amount of Recovery. — Under a clause in a liability 
policy limiting liability in case of the bodily injury or death of 
one person to $5,000, a policy holder cannot recover more 
than that sum, although a judgment may have been recovered 
against him in a much larger sum on a claim within the policy, 
and the policy contains a further limit of $10,000 where more 
than one person has been injured, subject to the same limit 
for each person. McClung v. Pennsylvania Taximeter Cab 
Co., (1916), 25 Pa. Dist. 583. 

An indemnity policy insuring against "damages on account 
of bodily injuries" limited the company's liability "on account 
of an accident resulting in such injuries to one person" to 
$5,000, and "subject to the same limit for each person, the 
corporation's total liability on account of any one accident re- 
sulting in injuries to more than one person" to $10,000. 
Damages were\recovered against the insured by two persons, 
husband and wife, for injuries to the wife, and paid. The 
insurance company, in an action on the policy, conceded that 
it was bound to indemnify the insured for both these re- 
coveries, subject to the limitation expressed in the policy. 



INDEMNITY INSURANCE 167 

The only question was whether the limit of liability was 
$5,000 or $10,000. It was held the limit was $5,000 under the 
condition quoted, this clause, by the use of the word "such" 
injuries referring only to bodily injuries, and limiting the indem- 
nity, "no matter how many may recover because of such injury, 
since, as in this case, more than one person may claim and se- 
cure damages for bodily injuries to the one person." The latter 
part of the condition, which increases the limit where more 
than one person is injured as a result of any one accident, is 
distinctly stated to be "subject to the same limit for each 
person," that is, to the $5,000 limit for each person receiving 
bodily injuries. Klein v. Employers' Liability Assurance Com- 
pany, (1918), 9 Ohio App. 241 

§145. Same; Bond Premium Not Covered. — An automobile 
company doing business in the State of New York issued a 
liability policy to a foreign corporation. Its automobile ran 
over a man, killing him. His administrator brought suit and 
attached the insured company's property in New York State. 
The insured bonded the attachment, and sued the insurance 
company to recover, and had judgment for the amount of 
the premium paid by it for the bond and the amount paid by 
it to the sheriff for poundage. The policy provided that the 
insurance company should defend suits, "pay all costs and ex- 
penses incident to the investigation, adjustment and settle- 
ment of claims, and all costs taxed against the assured in any 
legal proceedings defended by the company." It was held, 
on appeal, that the insured could not recover the bond prem- 
ium and poundage, for, while it would not have been put to 
this expense had there been no accident, and thus no suit, 
the expense was occasioned wholly by the fact that it was a 
non-resident; and the bonding of the attachment merely 
caused the substitution of one form of security for another, 
the attachment not /affecting the merits of the controversy 
in the suit. Green River Distilling Co. v r Massachusetts 
Bonding & Insurance Co. (1920)— N. Y. App. Div.— 185 ,N. Y. 
Supp. 307. 



168 AUTOMOBILE INSURANCE LAW 

§146. Same; Insured's Costs After Insurer's Failure to 
Defend Suit. — A clause in an indemnity policy obligated the 
insurance company to "pay all costs incurred with the com- 
pany's written consent." In an action by the insured against 
the company for attorney's fees and costs incurred by him in 
the defense of a suit for damages for the death of a child 
caused by the operation of the automobile, which was subse- 
quently settled, ,the court said: "The company having re- 
fused to defend, as it had obligated itself to do, it was in- 
cumbent upon Schwartz (the insured) to conduct his own 
defense. Since the question of Schwartz's liability for the 
death of the child is not now in question, because he is not 
now suing for the amount paid as damages, but for attorney's 
fees for which he is liable, he is clearly entitled to recover, 
and it was not necessary that the fee be paid to enable him 
to recover, but when he established that he was obligated to 
pay, and that his fee is reasonable, the liability contemplated 
by the policy had arisen, and his cause of action accrued." 
And in such circumstances the insurance company's consent 
in writing to incur the fee was not essential. Royal Indemnity 
Co. v. Schwartz (1914)— Tex. Civ. App.— 172 S. W. 581. 

Where the policy provides that the insurer is to defend any 
damage suit against the insured, covered by the policy, 
whether groundless or not, the insurer, on failure to defend 
a suit, notwithstanding it was groundless and defeated, will 
be liable to the insured for the costs and expenses of the de- 
fense. Green-Robbins Co. v. Pacific Surety Co, (1918), 37 
Cal. App. 540, 174 Pac. 110. 

§147. Provision Against ¥v 7 aiver of Conditions by Com- 
pany's Officers. — Where a condition in a liability policy ex- 
pressly provides that no provision of the policy shall be 
"waived or altered, except by endorsement hereon signed by 
the president or the secretary, " a parol promise by the vice- 
president and general manager of the company to a policy 
holder to save him harmless from liability under a possible 
judgment, although the amount might exceed the limit of 
liability in the policy, is void as in conflict with an essential 



INDEMNITY INSURANCE 169 

condition of the policy. McClung v. Pennsylvania Taximeter 
Cab Co. (1916) 25 Pa. Dist. 583. 

§148. Effect of Settlement by Insurer on Rights of Insured. 

— An automobile indemnity contract has been said to be one 
where, being properly notified of an accident or damage 
covered by the policy, the insurance company agrees to step 
into the assured's shoes so far as handling the claim or effect- 
ing settlement or defending suits is concerned; and the at- 
titude that it requires an assured to take when a claim is 
made against him is rather one of an agent to the company 
than a principal for whom the company is acting. Besides, 
the contract is to handle only such business as is brought 
against the assured, and none of the provisions of the policy 
can be construed as giving the insurance company power to 
settle any claims which the assured may have against some 
third party. 

Therefore, where an insured had a collision with another 
automobile, clearly caused by negligence of the driver of the 
latter, but the driver of the other car threatened to sue the 
insured and the insurance company's adjuster settled with 
the driver of the other car for $200, this settlement which 
the insured had no hand in, he being forbidden by his policy 
to interfere with negotiations for the settlement of claims, 
did not bind him and estop him from asserting a claim for 
damages to his automobile against the driver of the other 
car. Burnham v. Williams and Quinn (1917) 198 Mo. App. 
18, 194 S. W. 751. 

§149. Effect of References to Insurance in Negligence Ac- 
tions. — The general rule that it is improper, in a negligence 
action, to bring to the knowledge of the jury information that 
the defendant is insured against the injury for which the ac- 
tion is brought is well settled. The rule applies alike to testi- 
mony introduced and to remarks of counsel. Akin v. Lee 
(1912) 206 N. Y. 20, 99 N. E. 85, reversing 145 App. Div. 950; 
Griessel v. Adeler (1918) 183 App. Div. 816, 171 N.Y. Supp. 183 ; 
Tincknell v. Ketchman (1912) 78 Misc. (N. Y.) 419, 139 N. Y. 



170 AUTOMOBILE INSURANCE LAW 

Supp. 620; Allen v. Arnink Auto Renting Co. v. United Trac- 
tion Co. (1915) 91 Misc. (N. Y.) 531, 154 N. Y. Supp. 934; 
Horan v. Altman (1919) 176 N. Y. Supp. 433; Livingston v. 
Dole (1918) 184 Iowa 1340, 167 N. W. 639; Scranton Gas & 
Water Co. v. Weston (1916) 63 Pa. Superior Ct. 570; Conover 
v. Bloom (1921)— Pa.— 112 Atl. 752; Blaback v. Blacksher 
(1914) 11 Ala. App. 545, 66 So. 863; Carter v. Walker (1914) 
—Tex. Civ. App.— 165 S. W. 483. 

It is also reversible error to permit counsel to ask jurors in 
such actions if they are connected with an insurance com- 
pany. Martin v. Lilly (1919) 188 Ind. 139, 121 N. E. 443; 
Schmidt v. Schalm (1913) 2 Ohio App. 268. 

The New York Court of Appeals has held it to be reversible 
error, in an action to recover for injuries to a plaintiff who 
was run into by an automobile, to admit testimony that the 
defendant stated, in a conversation after the accident, that he 
was insured against such accidents. The court said: "Such 
evidence, almost always, is quite unnecessary to the plaintiff's 
case and its effect cannot but be highly dangerous to the de- 
fendant's ; for it conveys the insidious suggestion to the jurors 
that the amount of their verdict for the plaintiff is immate- 
rial to the defendant. It was a highly improper attempt on 
the plaintiff's part to inject a foreign element of fact into his 
case, which might affect the jurors' minds, if in doubt upon 
the merits, by the consideration that the judgment would be 
paid by an insurance company. While, frequently, in the ex- 
ercise of the authority conferred upon this court, we dis- 
regard technical errors, when we see that they do not affect 
the merits of the controversy, the error committed in this 
case is of too grave a nature to be put aside as merely tech- 
nical. In repeated instances, judgments have been reversed 
for its commission and counsel must take notice that we shall 
adhere to our rule and that we shall order a new trial in all 
cases where, in such actions, a verdict may have been in- 
fluenced by the consideration of such unauthorized evidence." 
Akin v. Lee (1912) 206 N. Y. 20, 99 N. E. 85, reversing 145 
App. Div. 950. 

In an action for injuries from a collision with the de- 



INDEMNITY INSURANCE 171 

fendant's automobile the defendant was asked on cross ex- 
amination, and was allowed, over objection, to answer, whether 
he had not told counsel he w r ould have to refer to his in- 
surance company. Subsequently the defendant's answer was 
stricken out, and the objection to the question sustained. A 
verdict for the plaintiff was set aside on the ground that the 
fact that the defendant was insured against any judgment 
which might be obtained against him was brought to the at- 
tention of the jury. It was unsuccessfully urged by the plain- 
tiff that evidence otherwise competent cannot be excluded 
because it incidentally infringes upon the general rule above 
stated, and that in this case the question was asked, not for 
the purpose of showing insurance protection, but to establish 
that, when the defendant was charged with causing the plain- 
tiff's injuries, he failed to deny that charge, thereby tacitly 
admitting his connection with the accident. It was on this 
theory that the trial court at first permitted the question to 
be answered, but upon reflection it reversed the ruling and 
sustained the objection. There still remained, however, the 
fact that the question had been put in the jury's presence. 
On this point the court said: "The question of fact as to 
whether or not defendant caused the accident under con- 
sideration was exceedingly close and it is impossible to say 
that the statement that defendant understood he had an in- 
surance behind him embodied in the question did not in- 
fluence the jury in rendering the verdict which it did. While 
it is true that the answer was stricken out and the objection 
to the question sustained, the prohibited matter was by the 
question brought squarely before the jury and might have 
had considerable weight in their determination." Tincknell 
v. Ketchman (1912) 78 Misc. (N. Y.) 419, 139 N. Y. Supp. 620. 
The offending party cannot escape the effect of the testi- 
mony given by him as to the defendant's statement to him 
that he had insurance on the car on the ground of his ignor- 
ance of the baneful effect it would probably have upon the 
jury. "He must be given credit for common sense and at 



172 AUTOMOBILE INSURANCE LAW 

least a modicum of knowledge of human nature." Carter v. 
Walker (1914)— Tex. Civ. App.— 165 S. W. 483. 

In an action by the owner of an automobile for damages 
done by a third person to the car, the fact that he carries 
insurance on the automobile against accident and that he has 
been paid in part, or even in full, by the insurance company for 
the damages for which he is suing, is not admissible for the 
purpose of reducing the damages recoverable for the de- 
fendant's negligence. Hill v. Condon (1915) 14 Ala. App. 332, 
70 So. 208. But see Magee v. Vaughan (1914) 212 Fed. 278, 
134 C. C. A. 388, holding that evidence of statements by the 
defendant as .to being insured was admissible to show owner* 
ship, where that was in doubt, or such control over the auto- 
mobile as would place a liability on the defendant from which 
he had protected himself by insurance, and that the fact that 
it might be inadmissible on other grounds and tend to preju- 
dice the minds of the jury in arriving at a verdict was not 
sufficient reason for excluding it. 

§150. Same; Error Cannot be Cured by Instructions to 
Jury. — The effect of such testimony or remarks of counsel is 
not cured by an instruction to the jury to disregard it. Tinck- 
nell v. Ketchman (1912) 78 Misc. (N. Y.) 419 139 N. Y. Supp. 
620; Martin v. Lilly (1919) 188 Ind. 139, 121 N. E. 443; Aqua 
Contracting Co. v. United Rys. Co. of St. Louis (1918) Mo. 
App. 203 S. W. 481 ; Schmidt v. Schalm (1919) 2 Ohio App. 
268. 

No amount of admonition to the jury can remove the effect 
of such testimony, because it cannot remove the knowledge 
that the suit was not one between citizens, but between a 
citizen and a corporation. Carter v. Walker (1914) — Tex. Civ. 
App.— 165 S. W. 483. 

In an action for injuries to the plaintiff's automobile, due 
to the defendant's negligence, the trial court was held within 
its judicial discretion in granting the plaintiff's motion for a 
new trial for misconduct of the defendant's counsel in in- 
quiring of a witness for the plaintiff whether the latter car- 
ried collision insurance, although the court had sustained 



INDEMNITY INSURANCE 173 

an objection to the question, had instructed the jury to dis- 
regard it, and had reprimanded counsel. The trial judge had 
before him not only the witnesses but the jury, and was 
judged better able than the appellate court to determine 
whether the effect of the poison so injected into the case by 
the defendant's counsel was still present with the jury. Aqua 
Contracting Co. v. United Rys. Co. of St. Louis (1918)— Mo. 
App.— 203 S. W. 481. 

In an action for damages against the owner of an auto- 
mobile intimations by counsel that some insurance company 
is interested in preventing a recovery, as by remarks in the 
presence of prospective jurors being examined on voir dire 
that doctors would probably be called upon to testify as to 
the physical condition of the defendant, both by the plaintiff 
and the insurance company, no insurance company being a 
party to the action, are prejudicial to the rights of the de- 
fendant and highly improper. They are not cured by the 
trial court's sustaining an objection to the remark, and in- 
structing the jury to entirely disregard any remark made 
about an insurance company being connected with the case. 
The court said: "The true defendant was thereby made to 
bear the burden of whatever prejudice existed in the minds of 
the jurors against insurance companies. This was manifestly 
unfair to him, as under a policy of casualty insurance the 
liability of the insurer is usually limited to a fixed amount. 
A recovery in excess of this amount in an accident case must 
be borne by the insured. Thus the defendant might have been 
greatly prejudiced by such a remark. Moreover, an insur- 
ance company, if there be one that is in anywise interested 
in the outcome of the case that is not a party to the action and 
does not have the right to plead or defend in the action, nor 
the right to show the nature and extent of its obligations to 
the defendant, should not be prejudiced in its rights by such 
remarks. Ths rights of the parties to an action should be de- 
termined by the pleadings and the evidence in the case and 
not by some extraneous consideration. Such a remark as 
that referred to, if made purposely, could have no other object 



174 AUTOMOBILE INSURANCE LAW 

than to prejudice the jury against the defendant, and is obvi- 
ously improper. " Schmidt v. Schalm (1913) 2 Ohio App. 
268. 

It has, however, been held that slight references made dur- 
ing the trial to a casualty company, which were stricken by 
the court from the record, and the jury admonished to pay no 
attention to them and no harm appearing to have resulted 
therefrom, did not constitute material error. Stafford v. Noble 
(1919) 105 Kan. 219, 182 Pac. 650. 

And where the trial court nullified the effect, if prejudice 
entered into the jury's verdict because of the improper refer- 
ence to insurance, by reducing the verdict from ! $7,500 to 
$5,000, the error was not considered on appeal. McNamara v. 
Leipzig (1917) 180 App. Div. 515. 

Where the defendant does not take any steps whatever in 
the matter of trying to nullify or render harmless an im- 
proper remark of an attorney by calling upon the court, by 
motion or otherwise, to make any ruling in the premises, and 
no ruling is made, error will not, on appeal, be predicated 
upon the improper remark. Norris v. West (Ind. App 1921) 
129 N. E. 862; Stafford v. Noble (1919) 105 Kan. 219. 

§151. Seme; Defendant Cannot Complain if Reference First 
Made by Him. — If the defendant himself injects into the case 
a reference to insurance, for which the plaintiff is in no way 
responsible, the defendant cannot thereafter take advantage of 
his own error and complain of a subsequent question as to in- 
surance by the plaintiff's counsel. Ward v. Teller Co. (1915) 60 
Colo. 47, 153 Pac. 219; Gianini v. Cerini (1918) 100 Wash. 687, 
171 Pac. 1007; Kellner v. Christiansen (1919) 169 Wis. 390, 172 
N. W. 796 

So, a defendant cannot complain of questions as to whether 
she was insured when she has opened up the matter herself 
by pleading and relying upon a release purporting to have 
been executed to her, but which was, in fact, negotiated by 
the indemnity company. Beatty v. Palmer (1916) — Ala. — 
71 So. 422. 



Chapter XVI 

Public Service Vehicle Bonds 

§152. Requirement by Statute or Ordinance of Bonds by Operators 

of Public Service Vehicles Valid. 
§153. Immaterial that Bonds May be Beyond Reach of Some Owners. 
§154. Requirement of Surety or Insurance Company Bond or Policy 

Valid. 
§155. Routing. 

§156. Liability for Lessee or Delegate Operating Bus. 
§157. Extent of Surety's Liability. 

§152. Requirement by Statute or Ordinance of Bonds by 
Operators of Public Service Vehicles Valid. — The requirement 
of the execution of bonds by operators of public service buses 
is a valid exercise of the police power and within the author- 
ity of the state and its governmental agencies, municipal 
corporations. Willis v. City of Fort Smith, (1916), 121 Ark. 
606, 182 S. W. 275, ($2,500) ; Hazleton v. City of Atlanta 
(1916), 144 Ga. 775, 87 S. E. 1043, 93 S. E. 202, ($5,000 held 
not unreasonable) ; Huston v. City of Des Moines, (1916), 176 
Iowa 455, 156 N. W. 883, ($2,000 held clearly reasonable) ; 
Ex parte Counts, (1915), 39 Nev. 61, 153 Pac. 93 ($10,000 for 
first jitney, and $5,000 for each additional bus) ; City of Mem- 
phis v. State ex rel. Ryals, (1915), 133 Tenn. 83, 179 S. W. 651 
($5,000); Ex parte Boyle, (1915), 78 Tex. Cr. 1, 179 S. W. 
1193, ($5,000; $2,500 for each injury to person or property) ; 
State v. Seattle Taxicab & Transfer Co., (1916), 90 Wash. 
416, 156 Pac. 837 ($2,500) ; Salo v. Pacific Coast Casualty Co., 
(1917), 95 Wash. 109, 163 Pac. 384; Singer v. Martin, (1917), 
96 Wash. 231, 164 Pac. 1105; Nelson v. Pacific Coast Casualty 
Co., (1917), 96 Wash. 43, 164 Pac. 594; Commonwealth v. 
Slocum, (1918), 230 Mass. 180, 119 N. E. 687 ($1,000 not un- 
duly burdensome or unreasonable) ; Commonwealth v. The- 
berge, (1918), 231 Mass. 386, 121 N. E. 30 ($2,500 not un- 

175 



176 AUTOMOBILE INSURANCE LAW 

reasonable); In re Cardinal, (1915), 170 Cal. 348, 150 Pac. 
348, ($10,000 aggregate; $5,000 for any one person killed 
or injured, $1,000 for injury or destruction of any property) ; 
Greene v. City of San Antonio, (Tex. Civ. App., 1915), 178 
S. W. 6; Auto Transit Co. v. City of Ft. Worth, (Tex. Civ. 
App., 1916), 182 S. W. 685; City of Providence v. Paine, 
(1918), 41 R. I. 333, 103 Atl. 786 ($500 for each passenger 
authorized to be carried in the bus) ; West v. Asbury Park, 
(1916),— N. J. L.— 99 Atl. 190; Ex parte Dickey, (1915), 76 
W. Va. 576, 85 S. E. 781; Ex parte Sullivan (1915) 77 Tex. 
Cr. 72, 178 S. W. 537; City of Dallas v. Gill (1918)— Tex. Civ. 
App.— 199 S. W. 1144; Ex parte Parr (1918) 82 Tex. Crim. 
App. 525, 200 S W. 404; Darrah v. Lion Bonding & Surety 
Co., (1918)— Tex. Civ. App.—, 200 S. W. 1101; Nolen v. 
Riechman, (1915), 225 Fed. 812 ($5,000 for each jitney operat- 
ed). "There can be no doubt that the safe operation of an 
automobile depends largely on the caution, skill and respon- 
sibility of its driver. Any measure that will tend to secure 
careful, competent men as drivers of jitneys will promote 
the safety of passengers and the general public. It is at 
once apparent that the requirement of a bond would have this 
effect. No one would be willing to become surety for a 
reckless or incompetent driver, and the fact that he was 
under bond, with his responsibility fixed, would, of itself, 
make the driver more careful. It would appear, therefore, 
that the city could properly require the giving of a bond in 
the reasonable exercise of its police power. " Lutz v. City 
of New Orleans, (1916) 235 Fed. 979. 

§153. Immaterial that Bonds May be Bey and Reach of 
Some Owners. — The fact that such bonds are denied to, or 
are not within the power of, those who are financially ir- 
responsible does not show that the act requiring them is 
unreasonable or unconstitutional as prohibitive. State v. 
Seattle Taxicab & Transfer Co., (1916) 90 Wash. 416, 156 
Pac. 837; Hadfield v. Lundin (1917) 98 Wash. 657. 

§154. Requirement of Surety or Insurance Company Bond 



PUBLIC SERVICE VEHICLE BONDS 177 

or Policy Valid. — Some ordinances provide for a surety com- 
pany bond or a policy of insurance executed by a company 
authorized to do business in the state. Ex parte Counts 
(1915) 39 Nev. 61, 153 Pac. 93. Such a requirement does nit 
render the provision invalid. In re Cardinal, (1915) 170 Cal. 
519, 150 Pac. 348. The court said: "We know of no constitu- 
tional right that one has to give any particular kind of se- 
curity. A legislative body having the right to require the 
giving of security necessarily has the right to prescribe the 
kind that shall be given, with the limitation always, of course, 
that its provisions in this regard shall not be unreasonable, 
or based upon any other consideration than its conclusion as 
to what is necessary for the protection of those concerned. " 
To the same effect is City of New Orleans v. Le Blanc (1916) 
139 La. 112, 71 So. 248. No one has ever successfully ques- 
tioned in the Washington courts the power of the legislature 
to make provisions restricting the character of the surety to 
surety companies licensed to do business in the state. State 
v. Seattle Taxicab & Transfer Co. (1916) 90 Wash. 416, 156 
Pac. 837. 

The requirement in a municipal ordinance that a jitney 
bond be signed by a surety company does not violate the lib- 
erty of contract of the owner of the machine. Lutz v. City 
of New Orleans, (1916), 235 Fed. 979. 

The objection that no surety company will execute the 
bond required unless the principal deposits with it $5,000 in 
cash, or collateral security, is not sufficient to make the or- 
dinance invalid. Personal surety might make the same re- 
quirement. Considering the greater desirability of corporate 
surety in any case, a superiority sometimes recognized by 
the law itself, it can hardly be said that the provision that the 
bond must be signed by a surety company is more onerous 
than would be a requirement of personal surety of equal re- 
sponsibility. Lutz v. City of New Orleans (1916) 235 Fed. 
979. 

In the Pennsylvania courts, however, a requirement of 
an ordinance that the bond must be furnished by a surety 



178 AUTOMOBILE INSURANCE LAW 

company, and forbidding the deposit of cash, or a certified 
check or municipal bonds, or the acceptance of individual 
freeholders of unquestioned financial responsibility, has been 
held unreasonable and void. Jitney Bus Assn. of Wilkes- 
barre v. City of Wilkesbarre (1917) 256 Pa. 462, 100 Atl. 954. 

§155. Routing. — Under the Washington act (Rem. Code, 
§ § 5562-37, 5562-38), requiring a permit and bond for the oper- 
ation of motor vehicles for hire in cities of the first class, it 
is held that liability on their bond for injuries received due to 
negligent operation is limited to injuries which occur within 
the city limits, in view of the dominant purpose of the act 
to regulate only operation in cities of the first class and to 
require no permits for cars operating outside of such limits. 
Bartlett v. Laphier (1917) 94 Wash. 354, 162 Pac. 533. But 
the Washington statute is not inapplicable to motor buses be- 
cause they do not operate on fixed routes, or because they 
charge different rates of fare for different distances, or be- 
cause they sometimes carry passengers across the boundary 
lines of the 'city. The prohibition is against carrying pas- 
sengers within a city of the first class in the vehicles named, 
and is operative so long as the passenger is being carried 
therein in the prohibited vehicles, no matter over what route, 
for what fare, or to what destination. Puget Sound Traction, 
Light & Power Co. v. Crassmeyer, (1918), — Wash. — , 173 
Pac. 504. 

Where the bond requires a change of route to be consented 
to by the surety, the surety will not be liable for injuries 
caused by the bus while being driven off the prescribed route 
without its permission. Motor Car Indemnity Exchange v. 
Lilienthal, (1921),— Tex. Civ. App.— 229 S- W. 703. 

Deviations from the proscribed route may, however, be 
authorized by the ordinance under which the bus is operated. 
Bond v. Hollo way, (1920),— Cal. App.—, 188 Pac. 577. 

A passenger automobile is being operated "in the service of 
a common carrier ,, within the terms of a liability bond, as re- 
quired by the Wisconsin statute, not merely while it is carry- 



PUBLIC SERVICE VEHICLE BONDS 179 

ing passengers on its route, but while it is running to a repair 
shop to receive the repairs necessary to enable it to continue 
its service as a common carrier. Ehlers v. Automobile Liabili- 
ty Co, (1919), 169 Wis. 494, 173 N. W. 325. 

§156. Liability for Lessee or Delegate Operating Bus. — 

Under an ordinance requiring a jitney bus owner to give a 
bond, and, in effect, providing that if an owner's servant puts 
another man in his place without authority from the owner, 
the owner shall suffer for such substitute's negligence rather 
than the passengers and public, who have a right to assume 
that the car would not be intrusted to any one to carry on the 
business unless he was the employee of the owner, the owner 
and his surety w r ere held liable for injuries to a pedestrian on 
a sidewalk, injured by the defective condition of the bus when 
operated by the driver for one who operated the car for the 
owner on a percentage basis, with a guarantee of $2.50 a day, 
where the ordinance requires operation on specified schedules 
under penalty of forfeiture of the owner's license, so that 
the operator on a percentage basis had to get somebody to 
relieve him at meal times. Western Indemnity Co. v. Berry, 
(1918) —Tex. Civ. App.— , 200 S. W. 245. 

Under the Washington statute the surety is liable for in- 
juries resulting from a machine for which the owner has se- 
cured the permit, though it is operated by a lessee. Any 
contract of the licensee tending to shift liability from himself 
and his bondsman and at the same time allow him to reap 
a benefit either in rental or a share of the profits must neces- 
sarily be construed as a device for evading the effect of the 
law. The permit and bond required by the statute cover a 
specific machine, and any contract which would defeat the 
statute would necessarily be void as against public policy. 
McDonald v. Lawrence, (1918), 100 Wash. 215, 170 Pac. 576. 

The Washington courts hold that the surety's liability to 
one who has been injured does not depend upon whether the 
principals on the bond are owners of the bus. The suretyship 



180 AUTOMOBILE INSURANCE LAW 

concerns the car and its operation and not its ownership. 
Horner v. Kilmer, (1921) —Wash.— , 196 Pac. 646. 

§157. Extent of Surety's Liability. — Under the Wash- 
ington statute the surety is liable to each person injured for 
the full amount of the damages, up to the extent of the pen- 
alty on the bond. Salo v. Seattle Taxicab & Transfer Co., 
(1917), 95 Wash. 109, 163 Pac. 384; Nelson v. Pacific Coast 
Casualty Co., (1917), 96 Wash. 43, 164 Pac. 594. 

In Pennsylvania, however, it is held that a requirement 
that "the bond shall be a continuing liability, notwithstanding 
any recovery thereon," if taken to mean that while the bond 
purported to be in the penal sum of $2,500, yet after recovery 
to that amount, the obligors should continue to be liable for 
other and additional amounts without limit, was held to be 
clearly unreasonable, since no surety could properly be asked 
to undertake such an indefinite and unlimited responsibility. 
Jitney Bus Assn. of Wilkesbarre v. City of Wilkesbarre, 
(1917), 256 Pa. 462, 100 Atl. 954. 

Where a bus operator filed two bonds, each in the sum re- 
quired by the city ordinance, $1,000, it was held that the 
liability of the sureties was not restricted to $500 each, and 
in the event of a judgment for more than $2,000 against the 
operator, one surety was liable to the full amount of his 
bond, though the other surety had paid $900 in compromise 
of the claim against him. Western Indemnity Co. v. Murray 
1919),— Tex. Civ. App.— , 208 S. W. 696. The court said: 
"The rule of contributon might apply as between appellant 
and the Maryland Casualty Company, if the amount of de- 
fault had not been more than $1,000, but where, as in this 
case, there are two separate and distinct bonds, each sup- 
ported by its own monthly payments of premium, the as- 
sured, the person injured, must be held to be entitled to re- 
cover upon both up to the amount of the bonds if the liability 
and default is that much." 

Under the Rhode Island statute the liability of the sureties 
is unconditional, and they may be proceeded against alone, 



PUBLIC SERVICE VEHICLE BONDS 181 

where the bond is joint and several ; and the right of action 
on the bond is not limited to passengers in the car of the 
licensee, but is also for the benefit of pedestrians or persons 
in automobiles other than that of the licensee. City of Provi- 
dence v. Paine, (1918), 41 R. I. 333, 103 Atl. 786. 

The California Supreme Court holds that a bond may be 
properly construed, though the obligation therein does not 
expressly run in favor of third persons, to include the re- 
quirements of an ordinance that it be so conditioned so that 
the surety company may be properly joined with the insured 
in an action for injuries by the operation of the bus. Milliron 
v. Dittman, (1919), — Cal.— , 181 Pac. 779. But in Calvitt v. 
Mayor, etc., of Savannah, (1919), — Ga. App.— , 101 S. E. 129, 
it is held that the surety is not a proper party to an action 
against the bus driver ; and a judgment against the principal 
is not conclusive as to the liabilty of the surety, but only prima 
facie evidence thereof. 

The New Jersey statute does not authorize the court to 
marshal the fund payable under the policy for division among 
those injured in an accident. The statute provides that be- 
fore an injured person can have recourse to the policy he must 
recover final judgment aganst the bus owner; and until he 
has final judgment he has no lien on the policy. The statute 
merely proposes to give those who suffer injury through the 
bus owner a special fund from which to collect, in case the 
bus owner is financially unable to respond in damages. What 
the Legislature has said, in effect, is that the policy should 
be for the benefit of every person suffering loss, damage, or 
injury who may establish his claim by judgment against the 
>us owner and proceed to collect from the insurance company 
in accordance with the law respecting judgments and execu- 
tions. Had it intended that the amount of the policy should 
be shared proportionately by all persons who, within the time 
xed by the statute of limitations, might sue kndj 'recover 
judgment against the bus owner, it would have said so, or it 
would have provided that the policy should be for the benefit 
of every person injured, to the extent of $5,000 per person. 



182 AUTOMOBILE INSURANCE LAW 

To hold that the policy is for the benefit of all injured persons 
pro rata would make it necessary for the insurance company 
to ascertain, before it could safely pay any one, how many 
persons might have claims thereon, whether growing out of 
one accident or several accidents occurring after the policy 
was written, and what the total amount of judgments which 
might be presented would be. 

The situation under the statute is that every person injured 
by a licensed auto bus may be said to have an inchoate lien 
upon the insurance policy, which inchoate right can ripen into 
an actual lien only by the recovery of final judgment against 
the bus owner and service of notice of the judgment on the 
insurance company. In the absence of any statutory pro- 
vision to the contrary, such liens have priority in the order in 
which they mature and are presented to the insurance com- 
pany. Turk v. Goldberg, (1920), — N. J. Eq.— , 109 Atl. 732. 

The bond under the Washington statute covers injuries to 
the property or business of passengers as well as injuries to 
their persons. Singer v. Martin, (1917), 96 Wash. 231, 164 
Pac. 1105. The loss recoverable under the New Jersey sta- 
tute is limited to such as results to a third party from bodily 
injury or death, and does not cover damages to an automo- 
bile. Gillard v. Manufacturers' Casualty Insurance Co., 
(1919) ,— N. J.—, 107 Atl. 448, reversing 92 N. J. L. 146, 104 
Atl. 709. 

Under the Washington statute parents may recover on the 
bond for the death of a minor child. Bruner v. Little (1917) 
97 Wash. 319, 166 Pac. 1166. 

Where the policy is limited to the particular car named 
therein, the insurer is not liable for an injury caused by a 
different car operated by the same owner. Downs v. Georgia 
Casualty Co., (1921), 271 Fed. 310. And failure to prove 
that the injury was caused by the automobile covered by the 
bond will bar recovery against the surety in an action on the 
bond. Motor Car Indemnity Exchange v. Lilienthal, (1921) — 
Tex. Civ. App.— 229 S. W. 703. 



TABLE OF CASES 

(REFERENCES ARE TO SECTIONS) 
A 

Section 

Adams v. White Bus Line. (1921)— Cal.— 195 Pac. 389 74 

Akin v. Lee (1912) 206 N. Y. 20; 99 N. E. 85 149 

Allen & Arnink Auto Renting Co. v. United Traction Co. (1915) 

91 Misc. 531 ; 154 N. Y. Supp. 934 73, 149 

American Automobile Ins. Co. v. Fox. (1919) — Tex. Civ. App. — 

218 S. W. 92 113 

American Automobile Ins. Co. v. Palmer (1913) 174 Mich. 295; 

140 N. W. 557 116 

American Automobile Ins. Co. v. Struwe (1920) — Tex. Civ. App. 

—218 S. W. 534 130 

American Automobile Ins. Co. v. United Rys. Co. (1918) 200 

Mo. App. 317; 206 S. W. 257 73 

American Automobile Ins. Co. v. Watts (1914) 12 Ala. App. 

518; 67 So. 758 21a 

American Fidelity Co. v. Bleakley (1912) 157 Iowa 442; 138 

N. W. 508 116 

American Indemnity Co. v. Fellbaum (1920) — Tex. Civ. App. — 

225 S. W. 873 138 

Aqua Contracting Co. v. United Railways Co. of St. Louis 

(1918)— Mo, App.— ; 203 S. W. 481 150 

Automobile Ins. Co. of Hartford v. Guaranty Securities Corp. 

(1917) 240 Fed. 222 22 

Automobile Securities Co. v. Atlas Assurance Co. (1919) 67 

Pitts. Legal Journal 303 76 

Auto Transit Co. v. City of Fort Worth (1916) — Texas Civ. 

App.— 182 S. W. 685 152 

B 

Bartlett v. Lanphier (1917) 94 Wash. 354 ; 162 Pac. 533 155 

Beatty v. Palmer (1916) 196 Ala. 67 ; 71 So. 422 151 

Bell v. American Insurance Co. (1921)— Wis.— 181 N. W. 733. .. . 12,16, 

107,111 
Berryman v. Maryland Motor Car Insurance Co. (1918) 199 

Mo. App. 503 ; 204 S. W. 738 64 

Bigus v. Pacific Coast Casualty Co. (1910) 145 Mo. App. 170; 

129 S. W. 982 91 

Birmingham Ry., Light and Power Co. v. Aetna Accident & 

Liability Co. (1913) 184 Ala. 601 ; 64 So. 44 74 

Blaback v. Blacksher (1914) 11 Ala. App. 545; 66 So. 863 149 

Bogle Ex Parte, (1915) 78 Tex. Crim. 1 ; 179 S. W. 1193 152 

Bond v. Holloway (1920)— Cal. App.— 188 Pac. 577 155 

British & Foreign Marine Ins. Co. v. Cummings (1910) 113 Mdl 

350; 76 Atl. 571 49, 58 

Brock v. Travelers Ins. Co. (1914) 88 Conn. 308; 91 Atl. 279 123 

Browne v. Commercial Union Ins. Co. (1916) 30 Cal. App. 547; 

158 Pac. 765 20, 29, 77 

Bruner v. Little (1917) 97 Wash. 319; 166 Pac. 1166 157 

Burnham v. Williams (1917) 198 Mo. App. 18; 194 S. W. 75L...115, 148 
Buxton v. International Indemnity Co. (1920) — Cal. App. — 191 

Pac. 84 .27, 93, 99, 102 

183 



184 AUTOMOBILE INSURANCE LAW 

(REFERENCES ARE TO SECTIONS) 

C Section 

California Insurance Co. v. Bishop (1920) — Tex. Civ. App. — 

228 S. W. 1010 81 

California Insurance Co. v. Eads (1919) — Tex. Civ. App. — 209 

S. W. 216 54 

Callahan v. London & Lancashire Fire Insurance Co. (1917) 

98 Misc. 589; 163 N. Y. Supp. 322. 48, 95, 100 

Calvitt v. Mayor, etc., of Savannah (1919)— Ga. App.— 101 

S. E. 129 157 

Campbell v. London & Lancashire Indemnity Co. (1917) 168 

N. Y. Supp. 300 . . 127 

Cantwtell v. General Accident, Fire & Life Assurance Corp. 

(1917) 205 111. App. 335 106 

Cardinal, In re, (1915) 170 Cal. 519; 150 Pac. 348.. v 152,154 

Carter v. Walker (1914)— Tex. Civ. App.— 165 S. W. 483 149,150 

Cass v. Lord (American Central Ins. Co.) (1920) — Mass. — 128 

N. E. 716 3, 9, 10, 17, 31, 81 

Chapin v. Ocean Accident & Guarantee Co. (1919) 96 Neb. 213; 

147 N. W. 465 . . 142 

ChepakofT v. National Ben Franklin Fire Ins. Co. (1916) 97 

Misc. 330; 161 N. Y. Supp. 283 99 

Chisholm v. Royal Insurance Co. (1917) 225 Mass. 428; 114 

N. E. 715 34 

Christison v. St. Paul Fire & Marine Insurance Co. (1917) 138 

Minn. 51 ; 163 N. W. 980 44 

City of Dallas v. Gill (1918)— Tex. Civ. App.— 199 S. W. 1144... 152 
City of Memphis v. State (1915) 133 Tenn. 83; 179 S. W. 651. . . . 152 
City of Providence v. Paine (1918) 41 R, I. 333; 103 AtL 786.^.152, 157 
Clark v. London Assurance Corp. (1921)— Ne v.— 195 Pac. 809... 24 

Cohen v. Chicago Bonding & Insurance Co. (1920) — Minn. — 178 

N. W. 485 112 

Collins v. Standard Accident Ins. Co. (1916) 170 Ky. 27; 185 

S. W. 112 133 

Commercial Union Assurance Co. v. Hill (1914) — Tex. Civ. 

App.— 167 S. W. 1095 63,67 

Commercial Union Assurance Co. v. Lyon (1915) 17 Ga. App. 

441; 87 S. E. 761.. 72 

Commonwealth v. Slocum, (1918) 230 Mass. 180; 119 N. E. 687.. 152 
Commonwealth v. Theberge (1918) 231 Mass. 386; 121 N. E. 30 152 

Conover v. Bloom (1920)— Pa.— ; 112 Atl. 752 149 

Cottingham v. Maryland Motor Car Ins. Co. (1915) 168 N. C. 

259 * 84 S. E. 274 72a 

Counts,' Ex Parte, (1915)' 39 Nev. 61 ; 153 PacV 93*. '. '. '. '. '. '..'. ' ". '. '. '. '. '. 152, 154 
Cranston v. California Ins. Co. (1919) 94 Oregon 369; 185 Pac. 

292 7,35,71 

Crowell v. Maryland Motor Car Insurance Co. (1915) 169 N. C. 

35; 85 S. E. 37; Ann. Cas. 1917 D. 50 ...12,14,63 

D 

Darrah v. Lion Bonding & Surety Co. (1918) — Tex. Civ. App. — 

200 S. W. 1101 152 

DawedofT v. Hooper (1916)— Tex. Civ. App.— 190 S. W. 522.... 74 



TABLE OF CASES 185 

(REFERENCES ARE TO SECTIONS) Section 

Day v. St. Paul Fire & Marine Insurance Co. (1920) — Wash. — 

189 Pac. 95 35, 52, 58 

Delafield v. London & Lancashire Fire Ins. Co. (1917) 177 App. 

Div. 477; 164 N. Y. Supp. 221 90 

Dickey, Ex Parte, (1915) 76 W. Va. 576; 85 S. E. 78 152 

Dimmick v. Aetna Insurance Co.. (1919) 213 111. App. 467 12,68 

Dimmick v. Illinois Automobile Fire Insurance Exchange 

(1920) 216 111. App. 543 68 

Dougherty v. Insurance Co. of North America (1910) 19 Pa. 

Dist. 547; 38 Pa. Co. Ct. 119 106 

Downs v. Georgia Casualty Co. (1921) 271 Fed. 310 157 

Drew v. American Automobile Ins. Co. (1918) — Tex. Civ. App. — 

207 S. W. 547 20,21 

Dunn v. First National Fire Ins. Co. (1918) 14 Schuylkill 

Legal Record 389 27,65 

E 

Eberhardt v. Federal Insurance Co. (1913) 14 Ga. App. 340; 

80 S. E. 856. 40, 42a, 42b 

Ehlers v. Gold (1919) 169 Wis. 494; 173 N. W. 325 78, 155 

Elder v. Federal Insurance Co. (1913) 213 Mass. 389; 100 N. E. 

655 61 

Emerson v. Western Automobile Indemnity Assn. (1919) 105 

Kan. 242; 182 Pac. 647 115, 126 

F 

Farber v. American Automobile Insurance Co. (1915) 191 Mo. 

App. 307; 177 S. W. 675 55, 83, 85 

Federal Insurance Co. v. Hiter (1915) 164 Ky. 743; 176 S. W. 

210 89, 102 

Federal Insurance Co. v. Munden (1918) — Tex. Civ. App. — 203 

S. W. 917 99 

Felgar v. Home Insurance Co. of New York (1917) 207 111. 

App. 492 87 

Fischer Auto & Service Co. v. General Accident, Fire & Life 

Assurance Corp. (1917) 8 Ohio App. 176 141 

Fodor v. National Liberty Insurance Co. of America (1919) 175 

N. Y. Supp. 112 7, 27 

Forbes Cartage Co. v. Frankfort Marine, etc., Ins. Co. (1915) 

195 111. App. 75 25,142 

Ford v. Stevens Motor Car Co. (1920)— Mo. App.— 220 S. W. 980 8 

Frost v. Heath (1918) 211 111. App. 454 100 

Fullerton v. United States Casualty Co. (1918) 184 Iowa 219; 

167 N. W. 700 15, 19, 119, 138 

G 

Gaffey v. St. Paul Fire & Marine Insurance Co. (1917) 221 

N. Y. 113; 116 N. E. 778 37,45 

Gallagher v. American Alliance Ins. Co. (1921)— 111. App.— ... .24,25,26 
Gianini v. Cerini (1918) 100 Wash. 687; 171 Pac. 1007 151 



186 AUTOMOBILE INSURANCE LAW 

(REFERENCES ARE TO SECTIONS) 

Section 

Gibson v. Georgia Life Insurance Co. (1915) 17 Ga. App. 43; 86 

S. E. 335 108 

Gillard v. Manufacturers Casualty Insurance Co. (1919) — N. J. 

Law— 107 Atl. 448; reversing 92 'N. J. L. 146; 104 Atl. 709. ... 157 
Glaser v. Williamsburg Citv Fire Ins. Co. (1921)— Ind. App. — 

125 N. E. 787 26, 27, 28 

Globe & Rutgers Fire Ins. Co. v. Adams (1921)— Mo. App.— 

230 S. W. 345 73 

Goodman v. Georgia Life Ins. Co. (1914) 189 Ala. 130; 66 So. 

649 130, 132 

Gould v. Brock (1908) 221 Pa. 38; 69 Atl. 1122 140 

Gould v. St. Paul Fire & Marine Ins. Co. (1919)— Wash.— 177 

Pac. 787 72a 

Graham v. Insurance Co. of North America (1915) 220 Mass. 

230; 107 N. E. 915..... 114 

Green River Distilling Co. v. Massachusetts Bonding & Insur- 
ance Co. (1920)— App. Div.— 185 N. Y. Supp. 307 145 

Green-Robbins Co. v. Pacific Surety Co. (1918) 37 Cal. App. 

540; 174 Pac. 110 146 

Greene v. City of San Antonio (1915) — Tex. Civ. App. — 178 

S. W. 6 152 

Griessel v. Adeler (1918) 183 App. Div. 816; 171 N. Y. Supp. 183. 149 
Gross v. Germania Fire Ins. Co. (1920) 29 Pa. Dist. Ct. 879.... 37,40 
Gunn v. Globe & Rutgers Fire Ins. Co. (1919) 24 Ga. App. 

615; 101 S. E. 691 94 

H 

Haas Tobacco Co. v. American Fidelity Co. (1919) 226 N. Y. 

343 ; 123 N. E. 755, affirming 165 N. Y. Supp. 230 141 

Hadfield v. Lundin (1917) 98 Wash. 657; 168 Pac. 516 153 

Hamilton v. Fireman's Fund Ins. Co. (1915) — Tex. Civ. App. — 

177 S. W. 173 61,71 

Hancock v. Hartford Fire Ins. Co. (1913) 81 Misc. 159; 142 

N. Y. Supp. 352 22 

Hanover v. Georgia Life Ins. Co. (1914) 141 Ga. 389; 81 S. E. 

206 108 

Hardenbergh v. Employers' Liability Assurance Co. (1913) 80 

Misc. 522; 141 N. Y. Supp. 502 106 

Harris v. American Casualty Co. (1912) 83 N. J. Law 641 107 

Harris v. St. Paul Fire & Marine Ins. Co. (1920) 126 N. Y. 

Suop. 118 56 

Hart v. Springfield Fire & Marine Ins. Co. (1914) 136 La. 114; 

66 So. 558 36, 39, 42 

Hartford Fire Ins. Co. v. Wimbish (1913) 12 Ga. App. 712; 

78 S. E. 265 87 

Hartigan v. Casualty Co. of America (1919) 227 N. Y. 175; 

124 N. E. 789, reversing 165 N. Y. Supp. 894, which affirmed 

161 N. Y. Supp. 145 13,120 

Hazelton v. City of Atlanta (1916) 144 Ga. 775; 87 S. E. 1043; 

93 S. E. 202 152 

Healy v. Stuyvesant Insurance Co. (1918) 72 Pa. Super. Ct. 

168 69 

Hill v. Condon (1915) 14 Ala. App. 332; 70 So. 208... 149 



TABLE OF CASES 187 

(REFERENCES ARE TO SECTIONS) 

Section 

Hoffman v. Prussian National Ins. Co. (1918) 181 App. Div. 

412; 168 N. Y. Supp. 841 83 

Home Insurance Co. v. Walter (1921) — Tex. Civ. App. — 230 

S. W. 723 40,42a 

Hopkins v. American Fidelity Co. (1916) 91 Wash. 680; 158 

Pac. 535 136 

Horan v. Altman (1919) 176 N. Y. Supp. 433 149 

Horner v. Kilmer (1921)— Wash— 196 Pac. 646 156 

Huston v. City of Des Moines (1916) 176 Iowa 455; 156 N. W. 

883 152 

J 

Jitney Bus Association of Wilkesbarre v. Wilkesbarre (1917) 

256 Pa. 462; 100 Atl. 954 154,157 

Johnson v. Home Mutual Insurance Co. (1921) — Iowa — 181 

N. W. 244 5. 103 

Jones v. Orient Insurance Co. (1914) 184 Mo. App. 402; 171 

S. W. 28 40 

K 

Kansas City Regal Auto Co. v. Old Colony Ins. Co. (1917) 196 

Mo. App. 255; 195 S. W. 579 100 

Kansas City Regal Auto Co. v. Old Colony Ins. Co. (1915) 

187 Mo. App. 514 95,99 

Kellner v. Christiansen (1919) 169 Wis. 390; 172 N. W. 796 151 

Kennellv v. London Guarantee & Accident Co. (1918) 184 App. 

Div." 1 ; 171 N. Y. Supp. 423 134 

Klein V. Employers' Liability Assurance Co. (1918) 9 Ohio 

App. 241 144 

Kress v. Insurance Co. of Pennsylvania (1916) 18 Luzerne Legal 

Register 278 61 

Kunkle v. Union Casualty Ins. Co. (1916) 62 Pa. Super. Ct. 

114 14, 122 

L 

Lee v. Casualty Co. of America (1916) 90 Conn. 202; 96 Atl. 

952 143 

Lepman v. Employers' Liability Assurance Co. (1912) 170 111. 

App. 379 44, 106 

Letendre v. Automobile Insurance Co. of Hartford (1921) — 

R. L— 112 Atl. 783 45,47 

Levin v. New England Casualty Co. (1916) 97 Misc. 7; 160 

N. Y. Supp. 1041; 101 Misc. 409; 166 N. Y. Supp. 1055; 

affirmed (1919) 187 App. Div. 935; 174 N. Y. Supp. 910 134 

Livingstone v. Dole (1918) 184 Iowa 1340; 167 N. W. 639 149 

Locke v. Royal Insurance Co. (1915) 220 Mass. 202; 107 N. E. 

911 51,59 

Lorando v. Gethro (1917) 228 Mass. 181; 117 N. E. 185' 128,130 

Lummus v. Fireman's Fund Ins. Co. (1914) 1671 N. C. 654; 

83 S. E. 688 51,66 

Lutz v. City of New Orleans (1916) 235 Fed. 978 152,154 

M 
McAleenan v. Massachusetts Bonding & Insurance Co. (1916) 
173 App. Div. 100; 159 N. Y. Supp. 401; affirmed 219 N. Y. 
563; 114 N. E. 114 .,,«,,. 135 



188 AUTOMOBILE INSURANCE LAW 

(REFERENCES ARE TO SECTIONS) 

Section 

McAleenan v. Massachusetts Bonding & Insurance Co. (1920) 

190 App. Div. 657; 180 N. Y. Supp. 287 139 

McClung v. Pennsylvania Taximeter Cab Co. (1916) 25 Pa. 

Dist. 583 12, 126, 137, 144, 147 

McConihe v. St. Paul Fire & Marine Ins. Co 86 

McDonald v. Lawrence( 1918) 100 Wash. 215; 170 Pac. 576 156 

McNamara v. Leipzig (1917) 180 App. Div. 515; 167 N. Y. Supp. 

981 150 

Magee v. Vaughan (1914) 212 Fed. 278; 134 C. C. A. 388 149 

Mannheimer Bros. v. Kansas Casualty & Surety Co. (1920) — 

Minn.— 180 N. W. 229 123 

Marmon Chicago Co. v. Heath (1917) 205 111. App. 605 14, 62 

Martin v. Lilly (1919) 188 Ind. 139; 121 N. E. 443. 149,150 

Maryland Motor Car Ins. Co. v. Haggard (1914) — Tex. Civ. 

App.— 168 S. W. 1011 74 

Mayor, Lane & Co. v. Commercial Casualty Ins. Co. (1915) 

169 App. Div. 772 ; 155 N. Y. Supp. 75v 61, 118, 127, 134 

Messersmith v. American Fidelity Co. (1919) 187 App. Div. 35, 

175 N. Y. Supp. 169 123, 125 

Michigan Commercial Ins. Co. v. Wills (1914) 57 Ind. App. 

256; 106 N. E. 725 87, 88 

Miller v. Commercial Union Assurance Co. (1912) 69 Wash. 

529; 125 Pac. 782 50 

Mississippi Electric Co. v. Hartford Fire Ins. Co. (1913) 105 

Miss. 767 '; 63 So. 231 30 

More v. Continental Insurance Co. (1915) 169 App. Div. 914; 

154 N. Y. Supp. 1134 28, 100 

Morrison v. Royal Indemnity Co. (1917) 180 App. Div. 709; 

167 N. Y. Supp. 731 77, 123, 138 

Motor Car Indemnity Exchange v. Lilienthal (1921) — Cal. 

App.— 188 Pac. 577 155, 157 

Mowles v. Boston Insurance Co. (1917) 226 Mass. 426; 115 

N. E. 666 2,3,4 

N 

Navickis v. Fireman's Fund Insurance Co. (1920) — Mass. — 126 

N. E. 388 77 

Neal, Clark & Neal Co. v. Liverpool & London & Globe Ins. 

Co. (1917) 178 App, Div. 730 ; 165 N. Y. Supp. 204 92, 97 

Nelson v. Pacific Coast Casualty Co. (1917) 96 Wash. 43; 164 

Pac 594 . . 152 157 

New Orleans v.* Le Blanc (1916) 139 La." 113;" 71 So." 248! !!!!!!!! * "" 154 

Nolen v. Riechman (1915) 225 Fed. 812 152 

Norris v. West (1921)— Ind. App.— 129 N. E. 862 150 

o 

O'Connor v. Maryland Motor Car Ins. Co. (1919) 287 111. 204; 

122 N. E.' 489 27, 100, 101 

O'Leary v. St. Paul Fire & Marine Ins. Co. (1917)— Tex. Civ. 

App.— 196 S. W. 575 110 

O'Neill v. Queen Insurance Co. of America (1918) 230 Mass. 

269: 119 N. E. 678 2,3 

Oakland Motor Car Co. v. American Fidelity Co. (1916) 190 

Mich. 74; 155 N. W. 729... 138,142 



TABLE OF CASES 189 

(REFERENCES ARE TO SECTIONS) 

Section 

Orient Insurance Co. v. Van Zandt-Bruce Drug Co. (1915) 50 

Okla. 558; 151 Pac. 323 51,61 

Ouimet v. National Ben Franklin Fire Ins. Co. (1920) 56 

Dominion Law Rep. 501 95, 98 

P 

Palatine Ins. Co. of London v. Commerce Trust Co. (1918) — 

Okla.— 175 Pac. 930 85 

Palmer v. Bull Dog Auto Ins. Co. Assn. (1920) 294 111. 28; 

128 N. E. 499 6, 11 

Parr, Ex Parte, (1918) 82 Tex. Crim. 525 ; 200 S. W. 404 152 

Pask v. London & Lancashire Fire Ins. Co. (1915) 211 111. 

A P p. 271 89, 98 

Patterson v. Adan (1912) 119 Minn. 308; 138 N. W. 281 130,132 

Patterson v. Standard Accident Ins. Co. (1913) 178 Mich. 288; 

144 N. W. 491 117 

Phoenix Assurance Co. v. Epstein (1917) 73 Fla. 991; 75 

So. 537 87, 88, 95, 99 

Preston v. Aetna Insurance Co. (1908) 193 N. Y. 142; 85 N. E. 

1006 • 80 

Puget Sound Traction, Light & Power Co. v. Grassmeyer (1918) 

—Wash.— 173 Pac. 504 155 

R 

Rabinowitz v. Vulcan Insurance Co. (1917) 90 N. J. L. 332; 

100 Atl. 175 56 

Radice v. National Fire Ins. Co. (1920) 190 App. Div. 893 100 

Reed v. St. Paul Fire & Marine Insurance Co. (1915) 165 App. 

Div. 660; 151 N. Y. Supp. 274, 56 

Rock Springs Distilling Co. v. Employers' Indemnity Co. (1917) 

160 Ky. 317; 169 S. W. 730 77,129 

Rouse v. St. Paul Fire & Marine Ins. Co. (1920) — Mo. App. — 

219 S. W. 688 105 

Royal Indemnity Co. v. Schwartz (1915) — Tex. Civ. App. — 

172 S. W. 581 123, 130, 146 

Rush v. Boston Insurance Co. (1914) 88 Misc. 48; 150 N. Y. 

Supp. 457 90 

Rydestrom v. Queen Insurance Co. of America (1921) — Md. — 

112 Atl. 586 96 

S 

St. Paul Fire & Marine Ins. Co. v. Huff (1915)— Tex. Civ. 

App.— 172 S. W. 755 53,82 

Salo V. Pacific Coast Casualty Co. (1917) 95 Wash. 109; 163 

Pac. 384 152, 157 

Sare v. United States Fidelity & Guaranty Co. (1919) 50 

Dominion Law Rep. 573 45 

Schambelan v. Preferred Accident Insurance Co. (1916) 62 

Pa. Super. Ct. 445 142 

Schmid v. Heath (1912) 173 111. App. 649 95 

Schmidt v. Schalm (1913) 2 Ohio App. 268 149,150 

Scranton Gas & Water Co. v. Weston (1916) 63 Pa. Super. 

Ct. 570 149 



190 AUTOMOBILE INSURANCE LAW 

(REFERENCES ARE TO SECTIONS) 

Section 

Seessell v. New American Casualty Co. (1918) 140 Tenn. 253 204 

S. W. 428 139 

Shaw v. Liverpool & London & Globe Ins. Co. (1915) 16 Lacka- 
wanna Jurist 288 65 

Sheridan v. Massachusetts Fire & Marine Ins. Co. (1918) 233 

Mass. 479; 124 N. E. 249 3,33 

Siegel v. Union Assurance Society of London (1915) 90 Misc. 

550 92 

Singer v. Martin (1917) 96 Wash. 231; 164 Pac. 1105 152,157 

Smith v. American Automobile Ins. Co. (1915) 188 Mo. App. 

297; 175 S. W. 115 49, 51, 56, 57, 58 

Solomon v. Federal Insurance Co. (1917) 176 Cal. 133; 167 

Pac. 859 35, 51, 53, 55, 56 

Solomon v. New Jersey Indemnity Co. (1920) — N. J. — 110 Atl. 

813 32 

Southern ' Garage " Co.' " v! " Brown ' (1914) ' i87 " Xia.' 484 ; * 65 ' So! 

400 74 

Springfield Fire & Marine Ins. Co. v. Chandlee (1913) 41 App. 

Cases D. C. 209 72a 

Springfield Fire & Marine Ins. Co. v. Chero Cola Bottling Co. 

(1918)— Ga. App.— 96 S. E. 332 70 

Stafford v. Noble (1919) 105 Kan. 219; 182 Pac. 650 150 

State v. Seattle Taxicab & Transfer Co. (1916) 90 Wash. 416; 

156 Pac. 837 152, 153, 154 

Steinfield v. Massachusetts Bonding & Insurance Co. (1920) 

— N. H.— Ill Atl. 303 121 

Stevens v. Stewart-Werner Speedometer Co. (1916) 223 Mass. 

44; 111 N. E. 771 73 

Stix v. Travelers Indemnity Co. (1913) 175 Mo. App. 171; 157 

S. W. 870 18, 108 

Stone V. American Mutual Auto Ins. Co. (1921) — Mich. — 181 

N. W. 973 27,99 

Strawbridge v. Standard Fire Insurance Co. (1916) 193 Mo. 

App. 687 85 

Stuht v. Maryland Motor Car Ins. Co. (1916) 90 Wash. 576; 

156 Pac. 557 87 

Stuht v. U. S. Fidelity & Guaranty Co. (1916) 89 Wash. 93; 

154 Pac. 137 107 

Sullivan, Ex Parte, (1915) 77 Tex. Crim. 72; 178 S. W. 537 152 

T 

Taxicab Motor Co. v. Pacific Coast Casualty Co. (1913) 73 

Wash. 631 ; 132 Pac. 393 124, 127, 133 

Tincknell v. Ketchman (1912) 78 Misc. 419; 139 N. Y. Supp. 

620 149, 150 

Traynor v. Automobile Mutual Insurance Co. (1921) — Neb. — 

181 N. W. 566 51, 58, 59 

Turk v. Goldberg (1920)— N. J. Eq.— 109 Atl. 732 157 

U 

Universal Service Co. v. American Insurance Co. of Newark 

(1921)— Mich.— 181 N. W. 1007 104, 111 

Underwriters at Lloyds Insurance Co. v. Vicksburg Traction 

Co. (1913) 106 Miss. 244; 63 So. 455 73 



TABLE OF CASES 191 

(REFERENCES ARE TO SECTIONS) 

Section 
Union Marine Insurance Co. v. Charlie's Transfer Co. (1914) 

186 Ala. 443 ; 65 So. 78 27, 38, 41, 79 

Utterback-Gleason Co. v. Standard Accident Insurance Co. of 
Detroit (1920) 179 N. Y. Supp. 836; affirmed 193 App. Div. 
646; 184 N. Y. Supp. 862 . . .14, 137, 138 

V 

Valley Mercantile Co. v. St. Paul Fire & Marine Insurance 

Co. (1914) 49 Mont. 430; 143 Pac. 559 88, 99 

Vulcan Insurance Co. v. Johnson (1920) — Ind. App. — 128 N. E. 

664 72 

W 

Wampler v. British Empire Underwriters Agency (1920) 54 

Dominion Law Rep. 657 12,36,113 

Ward v. Teller Co. (1915) 60 Colo. 47; 153 Pac. 219 151 

West v. Asbury Park (1916) 89 N. J. L. 402 ; 99 Atl. 190 152 

Western Indemnity Co. v. Berry (1918) — Tex. Civ. App. — 200 

S. W. 245 156 

Western Indemnity Co. v. Murray (1919) — Tex. Civ. App. — 

208 S. W. 696 157 

Wetherill v. Williamsburgh City Fire Insurance Co. (1915) 

60 Pa. Super. Ct. 37.- 109 

Wettengel v. U. S. "Lloyds" (1914) 157 Wis. 433; 147 N. W. 

360 , . . . 107 

White v. Home Mutual Insurance Co. (1920) — Iowa — 179 N. W. 

315 53, 60, 66, 67, 78 

Williams v. Nelson (1917) 228 Mass. 191; 117 'N. E. 189 123,131 

Willis v. City of Fort Smith (1916) 121 Ark. 606; 182 S. W. 

275 152 

Wilson v. * Scottish Insurance ' Corp.' [1920] 2 Ch.' 28 ; 89 L. J. 

(Ch.) 329, (1920) W. C & Ins. R. 107; 123 L. T. 404; [1920] 

W. N. 169; 36 T. L. R. 545; 64 L. J. 514.... 86a 

Wilson Bryant Co. v. Agricultural Insurance Co. of Watertown 

(1918) 171 N. Y. Supp. 218 43 

Wolff v. Hartford Fire Insurance Co. (1920)— Mo. App.— 223 

S. W. 810 43, 85, 86 

Wyker v. Texas Co. (1918) 201 Ala. 585; 79 So. 7 75 

Z 

Zackwik v. Hanover Fire Insurance Co. (1920) — Mo. App. — 

225 S. W. 135 , 24, 49, 85 



INDEX 

(references are to sections) 

ABANDONMENT OF STOLEN CAE TO INSUEEB 

Eight to Make, When 101 

ACCEPTANCE OF APPLICATION 

Necessity For 5 7 n 

ACCIDENT, NOTICE OF, TO INDEMNITY INSUEEE 

Necessity For 141 142 

Time For mm 142 

Purpose of • 142 

Waiver of , 143 

ACCIDENT POLICIES 

Distinction Between and Collision Policies 105 

ACTIONS. See Suits. 

ADDITIONAL INSURANCE. See Other Insurance. 

ADJUSTEE 

Cannot Delegate Powers Without Express Authority 34 

Cannot Exceed Powers, 34 

Extent of Authority 34 

Authority to Admit Liability 36 

Effect of Insured's Eefusal to Accept Adjuster's Estimate. ... 36 

Cannot Waive Defense that Loss not Covered by Policy 34, 36 

AGE OF DEIVEE 

Violation of Statute and Policy Provision 123 

Causative Connection with Accident 123 

AGENT 

Authority of Local 29 

Limits of Authority 30 

For Disclosed Principal 31 

For Undisclosed Principal 32, 33 

As Agent for Insured 35 

Waiver of Warranty by General Agent. 67 

Authority to Make Entries Required by Dealer's Policy 81 

AGREEMENTS TO KEEP CAR INSURED 

Validity of • • 8 

AID IN DEFENSE 

Of Negligence Action Against Insured 123 

AMBIGUITY 

Question of Law for Court 13 

AMBIGUOTTQ rr attpe« 

Construed in Favor nf Insured 1* 

In Case of Hirinc Warranty 63 

In Cases of Collision .107, 108, 109 

AMOUNT OF RECOVERY 

Under Fire Policies. 84, 85, 86, 86a 

Under Theft Policies 102 

Under Indemnity Policies 144 

Attachment Bond Premium not Covered 145 

Insured's Costs After Failure to Defend Suit 146 

193 



194 AUTOMOBILE INSURANCE LAW 

(references are to sections) 

APPEAL 

Effect of Indemnity Insurer 's Failure to 139 

APPEAL BOND 

Company 's Duty as to 139 

APPLICATION 

Effect of Approval of 5 

Necessity for Acceptance of 5, 7, 11 

APPEAISAL. See Arbitration, Appraisal and Award, 

APPEECIATION IN VALUE 86 

AEBITEATION, APPEAISAL AND AWAED 

Eight to Appraisal Waived by Denial of Liability 37 

Award Merges Eight to Action on Policy 38 

Appraisal not Barred by Total Loss 39 

Bad Faith of Appraisers Invalidates Award 40 

Evidence Must Clearly Show Bad Faith 40 

Appraisers Cannot Impeach Own Award 40 

Failure of Appraiser to Sign Award 41 

Effect of Eefusal to Arbitrate on Statutory Penalties 42 

Parties Need not Have Notice of Appraisement 42a 

Proceedings in Appraisements 42a 

Sufficiency of Award 42b 

ASSIGNMENT OF CLAIMS UNDEE POLICIES 

When Insufficient as Basis of Action 76 

ATTACHMENT 

Insufficient Cause of Action 76 

Bond Premium not Covered . . 145 

AWAED. See Arbitration, Appraisal and Award. 

BAILEE 

Conversion by not Covered 94 

BODILY INJUEY 

Definition 131 

As Affecting Third Person 's Eight to Eecover 131 

BONDS FOE OPERATORS OF PUBLIC SEEVICE VEHICLES. See Pub- 
lic Service Vehicles Bonds. 

BEOKEE 

Authority to Act for Insurer 33, 55 

Statements of Broker as Evidence of Agency 33 

Acts not Constituting Broker Insurer's Agent. 33 

As Agent for Insured 35 

BURDEN OF PEOOF 

Of Misrepresentations 49 

As to Renting and Hiring Warranties 65 

As to Value of Car 85 

As to Theft 99 

As to Collision 106 

CANCELLATION OF POLICY 

Necessity for Surrender 21 

Notice of Cancellation 21a 

Waiver of Condition as to Eeturn of Premium 22 

Waiver of Cancellation Provisions 23 



INDEX 195 

(references are to sections) 

COLLISION INSURANCE 

In General 104 

Decisions Lacking in Uniformity 104 

Collision Defined as Striking Against 109, 111 

Distinction Between Collision and Accident Policies 105 

Collision "With Any Object" 106 

Running Wheel into Hole not Collision 106 

Collapse of Wheel from Strain After Skidding not Covered. '. . . 106 

Collision Need not be With Moving Object 106 

Object may be Horizontal, not Perpendicular 107, 111 

Contact with Water held Collision 107 

Collision with Object Ejusdem Generis with Automobile 107 

Ejusdem Generis Rule not Followed 108 

Upsets 

Recovery Where Collision Precedes Upsets 107 

Upset not Collision 107 

Roadbed 

What it Includes 108 

Curbing Included in Roadbed 108 

Gutter not Included 108 

Fall into Elevator Shaft Covered 109 

Fall of Floor on Automobile Not Covered 110 

Fall of Steam Shovel on Autotruck Covered Ill 

1 ' Entering or Leaving Building ' ' Covers Accidents not Caused 

by Collision 109 

Violation of Law by Insured 112 

COMPROMISE. See Settlements. 

CONVERSION 

Usually not Covered 92 

May be Covered by Special Contract 93 

by Bailee not Covered 94 

Proof of 93 

COSTS OF INSURED 

In Defending Action, Liability for 127 

After Insurer 's Failure to Defend Suit 146 

COUNTER OFFER 

To Proposal 7 

COVERAGE 

Proof of 7, 33 

CRIMINAL PROSECUTIONS 

Not Covered by Indemnity Policies 117 

DEALERS* POLICIES 

Reporting Fire Losses 81 

Special Contract Covering Conversion 93 

DEDUCTIBLE CLAUSE 

Effect of 18 

DEMONSTRATION OR TESTING 

Exception in Indemnity Policy 122 

DEPRECIATION IN VALUE 

Under Valued Policy 84, 85, 86 

Evidence as to 86 



196 AUTOMOBILE INSURANCE LAW 

(references are to sections) 

"DERAILMENT" 

In Transportation Insurance . 11 i 

1 ' ENTEEING OR LEAVING BUILDING ' ' 

Accidents not Caused by Collision Held Covered 109 

ESTOPPEL 

As to Payment of Judgment 126 

As to Notice of Accident 143 

By Action of Adjuster 36 

EXPERT EVIDENCE 

As to Meaning of ' ' Demonstration or Testing M 122 

FAILURE OP INSURED 

To Read Policy Immaterial 10 

FALL OF AUTOMOBILE 

Into Stream Covered 107 

Into Elevator Shaft Covered 109 

Down a Hill Followed by Collision with Tree, not Covered 107 

FALL OF STEAM SHOVEL * 

On Autotruck Covered Ill 

FALSE REPRESENTATIONS. See Representations and Warranties. 

FIRE INSURANCE 

Fire Originating Within Car 80 

Reporting Fire Losses by Dealers 81 

Certificate for Reporting Fire Losses 81 

Agent's Agreement to Make Entries on Certificates 81 

Care of Car by Insured After First Fire. 82 

Identification of Burned Automobile 60 

GARAGE WARRANTY. See Representations and Warranties. 

GARNISHMENT 

On Judgment Against Insured 132 

HIRING WARRANTIES. See Representations and Warranties. 

IDENTIFICATION 

Of Burned Automobiles 60 

INCUMBRANCES 

Breach of Provision as to, Voids Policy 72a 

Revival of Policy on Cancellation of 72a 

INDEMNITY INSURANCE 

In General 115 

Defined ,. H5 

Right to Issue 116 

Criminal Prosecutions not Covered 117 

Use of Car by Third Party not Covered 118 

Use of Car by Member of Owners Family May be Covered. . . . 119 

Policies Insuring Partnerships 120 

Policies Insuring Partners 121 

Exception of Cars Used for Demonstration or Testing 122 

Violation of Statute and Policy Provision as to Age of Driver. 123 

Violation of Speed Ordinance 124 

Violation of Statute as to Registration 124 

Liability or Indemnity 126 

Actual Payment of Loss by Insured 126 



INDEX 197 

(references are to sections) 

Indemnity Insurance (Continued) 

Actual Trial of Issue 126 

Prevention of Payment by Insured 126 

Interest Prior to Payment 126 

What Constitutes Payment of Judgment 127 

Condition as to Payment Prohibited by Statute 128 

Voluntary Payment by Insured 129 

Eight of Injured Person to Sue Insurance Company 130 

il Bodily Injury" Affecting Third Person's Right to Recover. . 131 

Judgment Debt Reached by Garnishment 132 

Aid by Insured in Defense of Negligence Action 133 

Settlements by Insured Without Insurer's Consent \Release 

Insurer 1 134 

Insurer's Refusal to Accede to Compromise 135, 137 

Interference with Negotiations 136 

Interference in Suits 137 

Waiver by Insurer of Defence by Assuming Control of Suit 

With Knowledge of Facts 138 

Effect of Insurer's Failure to Appeal 139 

Insurer Cannot be Enjoined from Defending Suit Against 

Insured 140 

Necessity for Notice to Insurer of Accident 141, 142 

Time for Notice of Accident 142 

Purpose of Notice 142 

Waiver of Condition as to Notice 142, 143 

Amount of Recovery. 144 

Attachment Bond Premium not Covered 145 

Insured's Costs After Insurer's Failure to Defend Suit 146 

Waiver of Condition by Insurer's Officers, Provision Against. 147 

Effect of Settlement by Insurer on Rights of Insured 148 

Effect of References to Insurance in Negligence Actions 149 

References to Insurance not Cured by Instructions to Jury. . . . 150 

Remarks of Counsel in Presence of Jurors. 150 

Reference First Made by Defendant 151 

INJURED PERSON 

His Right to Sue Insurance Company 130 

" Bodily Injury" as Affecting Third Person's Right to 

Recover 131 

INSURABLE INTEREST 

Necessity for 2 

INTERFERENCE WITH NEGOTIATIONS 

What Constitutes , 136 

INTERFERENCE IN SUITS 

In Indemnity Insurance 137 

"JITNEY" INSURANCE. See Public Service Vehicle Bonds. 

KNOWLEDGE OF LOSS 

By Insured Before Risk Attaches 6 

LARCENY. See Theft. 

LIABILITY OF INSURER. See Amount of Recovery. 

LOSS, Extent of 

Expert Testimony Proper 43 

By Theft 102 



198 AUTOMOBILE INSURANCE LAW 

(references are to sections) 

LOSS, NOTICE AND PEOOFS OF. See Notice and Proofs of Loss. 

MISREPRESENTATIONS. See Representations and Warranties. 

NEGLIGENCE OF INSURED 

Held no Defense in Action on Fire Policy 78 

NEGOTIATIONS, INTERFERENCE WITH 

What Constitutes . . . . . 136 

NOTICE AND PROOFS OF LOSS 

Necessity for 24 

Time for 25 

Evidence of Receipt by Company 26 

Waiver of 27 

Waiver of Question for Jury 28 

NOTICE TO INDEMNITY INSURER OF ACCIDENT 

Necessity for 141, 142 

Time for 142 

Waiver of *. .142, 143 

ONE FORM OF CLAUSE CANNOT BE USED 

In Construing Another 16 

ORAL CONTRACTS 

Necessity for Consideration 3 

Duration 3, 4 

Broker ? s Authority to Bind Insurer by 33 

OWNERSHIP 

What Constitutes Change of 71 

Waiver of Conditions as to 72 

Misrepresentations as to Will Void Policy 70 

See also Representations and Warranties. 

PARTNERS 

Indemnity Policies Insuring 121 

PARTNERSHIPS 

Indemnity Policies Insuring 120 

PAYMENT OF LOSS BY INSURED UNDER INDEMNITY POLICY 

Necessity for 126 

After Actual Trial of Issue 126 

Prevention of Payment 126 

Interest Prior to Payment 126 

What Constitutes Payment of Judgment 127 

Statute Prohibiting Condition )as to Payment 128 

Voluntary Payment by Insured not Actual Payment 129 

PILFERAGE. See Theft. 

PRACTICAL CONSTRUCTION 

Of Policy by Parties 15 

PRIOR NEGOTIATIONS 

Policy Cannot be Varied by 9 

PROOFS OF LOSS. Bee Notice and Proofs of Loss. 

PUBLIC SERVICE VEHICLE BONDS 

Requirement by Statute or Ordinance Valid 152 

Immaterial that Bonds may be Beyond Reach of Some 153 



INDEX 199 

(references are to sections) 

Public Service Vehicle Bonds (Continued) 

Eequirement of Surety Company Bond or Insurance Policy 

Valid 154 

Liability for Lessee or Delegate Operating Vehicle. 156 

Extent of Surety 's Liability 157 

REFERENCES TO INSURANCE IN NEGLIGENCE ACTIONS 

Constitute! Reversible/ Error 149 

Not Covered by Instructions to Jury 150 

Remarks of Counsel in Presence of Jurors 150 

Objection Must be Made at Trial 150 

Defendant Cannot Complain if References First Made by him. . . . 151 
REFORMATION OF POLICY 

Mistake must be Mutual 19, 20 

REGISTRATION 

Violation of Statute as to 125 

RENEWAL OF POLICY 

A New Contract 11 

RENTING "WARRANTIES. See Representations and Warranties. 
REPAIRS 

Cost of as Measure of Damages 44 

Contract to Repair Supersedes Contract to Pay Loss 45 

Effect of Offer to Repair 45 

Time Within which Offer to Repair may be Made 46 

Liability for Delay in Repairs 47 

Liability for Depreciation During Repairs 47 

Evidence as to Repairability 48 

In Case of Theft 102 

"REPLACEMENT" 

Denned 44 

REPRESENTATIONS AND WARRANTIES 

In General 49 

1 ' Misrepresentations ' ' Denned . . . . 49 

Burden of Proof of on Company 49 

Representations Made Warranties by Stipulation 50 

Intent to Deceive §2 

As to Cost 53 

May be Question for Jury 54 

Knowledge by Company's Agent of Cost Estops Company 55 

As to Year Model 56 

Good Faith of Insured Immaterial 57 

Effect of Inspection by Agent 58 

Materiality may be for Jury • 59 

Where Insurer not Deceived to his Injury 59 

Materiality of Representations 51 

Burden of Proof of, on Company. . 49 

Question of Law or Fact _ 51, 59 

How Determined 51 

Renting and Hiring Warranties 

Usually Promissory Warranties 61 

Breach Avoids Policy Without Provision to that Effect. . 61 

Breach does not Merely Suspend Operation of Policy 61 

Right to Return of Premium 61 



200 AUTOMOBILE INSURANCE LAW 

(references are to sections) 

Representations and Warranties (Continued) 

Where not a Promissory Warranty 61 

Occasional Use for Hire Held no Breach 63 

Warranties Apply Both to Mortgagor and Mortgagee 62 

Effect of Statute 'Abolishing Warranties 64 

Violation Usually for Jury. 65 

Burden of Proof 65 

Location of Automobile 

Material to Contract 66 

Waiver of Location Warranty - 67 

' * Private Garage ' ' Defined 66 

Other Insurance Provision 

Breach will Prevent Eecovery 68 

Proof of 68 

Does Not Necessarily Forfeit Policy 69 

Ownership 

Misrepresentations as to, Will Void Policy 72 

What Constitutes Change of 71 

Waiver of Condition as to 70 

RETENTION OF POLICY BY INSUPvED 

Effect of ...... 55 

Eight to Issue Indemnity Insurance 116 

EIDER 

So Declaring, Will Prevail Over Clauses in Policy 17 

Attachment of Wrong Eider by Local Agent 29 

"EOADBED." See Collision Insurance. 

EOBBEEY. See Theft. 

EOUTING 

Of Public Service Vehicles as Affecting Liability Under Bonds. 155 

SETTLEMENT BY INDEMNITY INSUEEE 

Effect on Eights of Insured 148 

SETTLEMENTS BY INSUEED 

Without Insurer's Consent Eelease Insurer 134 

Insurer's Eefusal to Accede to Proposed Compromise 135 

SETTLEMENTS, VOLUNTAEY 

By Company do not Estop it from Denying Liability 77 

SINKING 

Of Ferryboat 113 

Of Automobile from Ferryboat 113 

SPEED OEDINANCE 

Violation of 124 

"STEANDING OE SINKING" 

In Transportation Insurance 113 

SUBEOGATION 

To Claim Against Negligent Third Person 73 

Loss Under Theft Policy 73, 74 

Not Affected by Judgment for Personal Injuries 73 

Effect of Settlement by Insured 74 

Action in Insured's Name for Use of Insurer 74 

Where Eeimbursement Partial 75 

Under Indemnity Policy 121 



INDEX 201 

(references are to sections) 

SUITS 

Interference in by Insured 137 

Insured Waives Defenses by Assuming Control of 138 

Knowledge of Facts 138 

Indemnity Insurer Cannot be Enjoined from Defending Suit 

Against Insured 140 

" SUITS' ' 

Term does not Cover Criminal Prosecutions 117 

SURETY COMPANY BOND 

For Public Service Vehicles, Eequirement of Valid 152, 154 

See, also, Public Service Vehicle Bonds. 

TESTING 

Exception in Indemnity Policy 122 

THEFT INSUBANCE 

Intent to Steal Necessary to Make Insurer Liable 87, 88, 89 

Taking Car for Jov Bide Merely not Covered 88 

Intent Shown by Taking Car Out of State 89 

Theft of Equipment 89, 98 

Taking by Trick or Device not Covered 90 

Mere Trespass not Theft 91 

Conditional Sales , 92, 93 

Special Contract with Dealer Covering Conversion 93 

" Steal' ' may be Used so as to Cover Conversion by Condi- 
tional Vendee 93 

Conversion by Bailee not Covered 94 

What Constitutes Employment with Insured 95 

By Person in Insured 's Employment 95 

May be Question for Jury 95 

By Person in Insured 's Household 96 

Time for Reporting Losses by Theft 97 

Waiver of Eequirement • • • • 97 

Proof of Thefts 99 

Cars Recovered after Theft 100 

Insurer's Bight to Return Found Car 100 

Time Within Which Found Car Must be Taken Back 100, 101 

Extent of Loss by Theft 102 

Unauthorized Change in Contract Barring Theft 

In Certain Places 103 

TRANSPORTATION INSURANCE 

' ' Stranding or sinking ' ' 113 

"Derailment" • • • • 114 

TRIAL OF ISSUE 

Payment of Loss by Insured After 126 

UNAMBIGUOUS POLICIES 

Construction of 12 

Derailment. Clause in Transportation Policy Held Unambiguous. 114 

UPSETS. See Collision Insurance. 

USE OF AUTOMOBILE IN INDEMNITY INSURANCE 

By Third Party , 118 

Bv Member of Owner 's Familv .?,,»» 119 



202 AUTOMOBILE INSURANCE LAW 

(references are to sections) 

VALUED POLICIES 

Avoided by Gross Overvaluation 83, 85 

As Affected by Depreciation in Value. 84, 85, 86 

Evidence as to Depreciation 86 

VALUED POLICY LAWS 

Conclusive Only as to Value at Time Policy is Written Under 

Missouri Statute 85 

VIOLATION OF LAW BY INSUEED 

In Collision Case 112 

VIOLATION OF SPEED OEDINANCE 

Under Indemnity Policy 124 

VIOLATION OF STATUTE 

As to Age of Driver 123 

As to Registration 125 

VOLUNTARY SETTLEMENTS 

Do not Estop Company 77 

WAIVER 

Of Return of Premium on Cancellation 22 

Of Cancellation Provisions 23 

Of Proofs of Loss 27,28 

By Action of Adjuster 36 

Of Right to Appraisement 37 

Of Location Warranty * . 67 

Of Provision as to Change of Ownership 72 

As to Reporting Fire Losses t 81 

Of Notice of Theft 97 

Of Return of Car to Place Where Stolen 100 

Of Defense by Assuming Control of Suit 138 

Of Notice of Accidents Under Indemnity Policies 142, 143 

Of Conditions in Policy by Insurer's Officers, Provision Against 147 

WARRANTIES. See Representations and Warranties. 



